Is Now The Time To Put Domain Holdings Australia (ASX:DHG) On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Domain Holdings Australia (ASX:DHG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Domain Holdings Australia with the means to add long-term value to shareholders.

See our latest analysis for Domain Holdings Australia

How Fast Is Domain Holdings Australia Growing Its Earnings Per Share?

In the last three years Domain Holdings Australia's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Domain Holdings Australia's EPS skyrocketed from AU$0.055 to AU$0.071, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 30%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Domain Holdings Australia shareholders can take confidence from the fact that EBIT margins are up from 16% to 21%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Fortunately, we've got access to analyst forecasts of Domain Holdings Australia's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Domain Holdings Australia Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like Domain Holdings Australia with market caps between AU$1.5b and AU$4.9b is about AU$2.2m.

The Domain Holdings Australia CEO received AU$1.3m in compensation for the year ending June 2023. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Domain Holdings Australia To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Domain Holdings Australia's strong EPS growth. Strong EPS growth is a great look for the company and reasonable CEO compensation sweetens the deal for investors ass it alludes to management being conscious of frivolous spending. Based on these factors, this stock may well deserve a spot on your watchlist, or even a little further research. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Domain Holdings Australia. You might benefit from giving it a glance today.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in AU with promising growth potential and insider confidence.

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.