With EPS Growth And More, Elmos Semiconductor (ETR:ELG) Is Interesting

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Elmos Semiconductor (ETR:ELG). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Elmos Semiconductor

How Quickly Is Elmos Semiconductor Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Elmos Semiconductor has grown EPS by 20% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Elmos Semiconductor shareholders can take confidence from the fact that EBIT margins are up from 6.3% to 20%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Elmos Semiconductor.

Are Elmos Semiconductor Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Elmos Semiconductor shares worth a considerable sum. Indeed, they have a glittering mountain of wealth invested in it, currently valued at €219m. Coming in at 26% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

Is Elmos Semiconductor Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Elmos Semiconductor's strong EPS growth. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. 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 Elmos Semiconductor. You might benefit from giving it a glance today.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.