If EPS Growth Is Important To You, Construcciones y Auxiliar de Ferrocarriles (BME:CAF) Presents An Opportunity

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Construcciones y Auxiliar de Ferrocarriles (BME:CAF). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Construcciones y Auxiliar de Ferrocarriles with the means to add long-term value to shareholders.

Check out our latest analysis for Construcciones y Auxiliar de Ferrocarriles

Construcciones y Auxiliar de Ferrocarriles' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Construcciones y Auxiliar de Ferrocarriles managed to grow EPS by 6.4% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. While we note Construcciones y Auxiliar de Ferrocarriles achieved similar EBIT margins to last year, revenue grew by a solid 10% to €4.2b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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 Construcciones y Auxiliar de Ferrocarriles.

Are Construcciones y Auxiliar de Ferrocarriles Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Construcciones y Auxiliar de Ferrocarriles, with market caps between €921m and €2.9b, is around €1.5m.

The Construcciones y Auxiliar de Ferrocarriles CEO received €851k in compensation for the year ending December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Construcciones y Auxiliar de Ferrocarriles Deserve A Spot On Your Watchlist?

As previously touched on, Construcciones y Auxiliar de Ferrocarriles is a growing business, which is encouraging. Not only that, but the CEO is paid quite reasonably, which should prompt investors to feel more trusting of the board of directors. So based on its merits, the stock deserves further research, if not an addition to your watchlist. What about risks? Every company has them, and we've spotted 1 warning sign for Construcciones y Auxiliar de Ferrocarriles you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Spanish companies which have demonstrated growth backed by significant insider holdings.

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.