If EPS Growth Is Important To You, Rheinmetall (ETR:RHM) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Rheinmetall (ETR:RHM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Rheinmetall with the means to add long-term value to shareholders.

See our latest analysis for Rheinmetall

How Quickly Is Rheinmetall Increasing Earnings Per Share?

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. Impressively, Rheinmetall has grown EPS by 23% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Rheinmetall achieved similar EBIT margins to last year, revenue grew by a solid 17% to €6.9b. 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 Rheinmetall's future EPS 100% free.

Are Rheinmetall Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Rheinmetall, with market caps over €7.3b, is about €4.2m.

The Rheinmetall CEO received €3.6m in compensation for the year ending December 2022. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Rheinmetall Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Rheinmetall's strong EPS growth. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. So this stock is well worth an addition to your watchlist as it has the potential to provide great value to shareholders. You should always think about risks though. Case in point, we've spotted 1 warning sign for Rheinmetall you should be aware of.

Although Rheinmetall certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of German companies that not only boast of strong growth but have also seen recent insider buying..

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.