Here's Why We Think Givaudan (VTX:GIVN) Is Well Worth Watching

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Givaudan (VTX:GIVN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Givaudan with the means to add long-term value to shareholders.

Check out our latest analysis for Givaudan

Givaudan's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Givaudan grew its EPS by 8.3% per year. That's a good rate of growth, if it can be sustained.

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. This approach makes Givaudan look pretty good, on balance; although revenue is flattish, EBIT margins improved from 15% to 18% in the last year. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Givaudan's future EPS 100% free.

Are Givaudan Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CHF42b company like Givaudan. 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 CHF3.0b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is Givaudan Worth Keeping An Eye On?

One important encouraging feature of Givaudan 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. It is worth noting though that we have found 1 warning sign for Givaudan that you need to take into consideration.

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 CH 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.