Is Now The Time To Put Commonwealth Bank of Australia (ASX:CBA) On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Commonwealth Bank of Australia (ASX:CBA). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Commonwealth Bank of Australia with the means to add long-term value to shareholders.

See our latest analysis for Commonwealth Bank of Australia

How Fast Is Commonwealth Bank of Australia Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Commonwealth Bank of Australia grew its EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It's noted that Commonwealth Bank of Australia's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Commonwealth Bank of Australia maintained stable EBIT margins over the last year, all while growing revenue 4.8% to AU$26b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Commonwealth Bank of Australia's future profits.

Are Commonwealth Bank of Australia Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a AU$173b company like Commonwealth Bank of Australia. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth AU$325m. We note that this amounts to 0.2% of the company, which may be small owing to the sheer size of Commonwealth Bank of Australia but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Does Commonwealth Bank of Australia Deserve A Spot On Your Watchlist?

One important encouraging feature of Commonwealth Bank of Australia is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Still, you should learn about the 1 warning sign we've spotted with Commonwealth Bank of Australia.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.