With EPS Growth And More, Delfingen Industry (EPA:ALDEL) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Delfingen Industry (EPA:ALDEL). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Delfingen Industry

How Fast Is Delfingen Industry Growing Its Earnings Per Share?

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that Delfingen Industry's EPS went from €1.41 to €22.59 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. The good news is that Delfingen Industry is growing revenues, and EBIT margins improved by 7.4 percentage points to 12%, over the last year. That's great to see, on both counts.

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.

Since Delfingen Industry is no giant, with a market capitalization of €138m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Delfingen Industry Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalizations between €89m and €354m, like Delfingen Industry, the median CEO pay is around €362k.

The CEO of Delfingen Industry was paid just €11k in total compensation for the year ending . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me 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 Delfingen Industry Worth Keeping An Eye On?

Delfingen Industry's earnings per share have taken off like a rocket aimed right at the moon. With rocketing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. While I couldn't be sure without a deeper dive, it does seem that Delfingen Industry has the hallmarks of a quality business; and that would make it well worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Delfingen Industry , and understanding them should be part of your investment process.

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. 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.