Here's Why Gestamp Automoción (BME:GEST) Has Caught The Eye Of Investors

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Gestamp Automoción (BME:GEST), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Gestamp Automoción

Gestamp Automoción's Improving Profits

Over the last three years, Gestamp Automoción has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Gestamp Automoción's EPS grew from €0.30 to €0.51, over the previous 12 months. Year on year growth of 71% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

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. Gestamp Automoción maintained stable EBIT margins over the last year, all while growing revenue 40% to €12b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Gestamp Automoción's future profits.

Are Gestamp Automoción 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. For companies with market capitalisations between €1.9b and €5.9b, like Gestamp Automoción, the median CEO pay is around €1.8m.

The CEO of Gestamp Automoción only received €646k in total compensation for the year ending December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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. It can also be a sign of a culture of integrity, in a broader sense.

Is Gestamp Automoción Worth Keeping An Eye On?

Gestamp Automoción's earnings have taken off in quite an impressive fashion. This appreciable increase in earnings could be a sign of an upward trajectory for the company. Meanwhile, the very reasonable CEO pay is a great reassurance, since it points to an absence of wasteful spending habits. So Gestamp Automoción looks like it could be a good quality growth stock, at first glance. That's worth watching. You still need to take note of risks, for example - Gestamp Automoción has 2 warning signs we think you should be aware of.

Although Gestamp Automoción 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.