If You Like EPS Growth Then Check Out Laboratorios Farmaceuticos Rovi (BME:ROVI) Before It's Too Late

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. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Laboratorios Farmaceuticos Rovi (BME:ROVI). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Laboratorios Farmaceuticos Rovi

How Quickly Is Laboratorios Farmaceuticos Rovi Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. Impressively, Laboratorios Farmaceuticos Rovi has grown EPS by 34% 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.

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. Laboratorios Farmaceuticos Rovi shareholders can take confidence from the fact that EBIT margins are up from 9.4% to 15%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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

Are Laboratorios Farmaceuticos Rovi Insiders Aligned With All Shareholders?

I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. For companies with market capitalizations between €1.6b and €5.3b, like Laboratorios Farmaceuticos Rovi, the median CEO pay is around €1.1m.

The Laboratorios Farmaceuticos Rovi CEO received €541k in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Laboratorios Farmaceuticos Rovi Worth Keeping An Eye On?

For growth investors like me, Laboratorios Farmaceuticos Rovi's raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, it probably has its best days ahead, and the modest CEO pay suggests the company is careful with cash. So I'd argue this is the kind of stock worth watching, even if it isn't great value today. Still, you should learn about the 1 warning sign we've spotted with Laboratorios Farmaceuticos Rovi .

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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This article by Simply Wall St is general in nature. 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.
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