Do Constellation Software's (TSE:CSU) Earnings Warrant Your Attention?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Constellation Software (TSE:CSU). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Constellation Software with the means to add long-term value to shareholders.

See our latest analysis for Constellation Software

Constellation Software's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Constellation Software managed to grow EPS by 13% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

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. On the one hand, Constellation Software's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Constellation Software's forecast profits?

Are Constellation Software Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CA$61b company like Constellation Software. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$4.2b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Does Constellation Software Deserve A Spot On Your Watchlist?

One positive for Constellation Software is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. 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 Constellation Software.

Although Constellation Software certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.