Here's Why We Think Roche Holding (VTX:ROG) 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 completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Roche Holding (VTX:ROG). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Roche Holding

How Quickly Is Roche Holding Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Roche Holding managed to grow EPS by 12% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Roche Holding maintained stable EBIT margins over the last year, all while growing revenue 7.2% to CHF64b. That's progress.

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.

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

Are Roche Holding Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CHF281b company like Roche Holding. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth CHF27b. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

Is Roche Holding Worth Keeping An Eye On?

One positive for Roche Holding is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. We don't want to rain on the parade too much, but we did also find 1 warning sign for Roche Holding that you need to be mindful of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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

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