Does Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML) Deserve A Spot On Your Watchlist?

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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Compagnie Générale des Établissements Michelin Société en commandite par actions (EPA:ML). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Compagnie Générale des Établissements Michelin Société en commandite par actions

Compagnie Générale des Établissements Michelin Société en commandite par actions' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Compagnie Générale des Établissements Michelin Société en commandite par actions grew its EPS by 4.9% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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 Compagnie Générale des Établissements Michelin Société en commandite par actions achieved similar EBIT margins to last year, revenue grew by a solid 20% to €29b. That's progress.

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.

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 Compagnie Générale des Établissements Michelin Société en commandite par actions' future profits.

Are Compagnie Générale des Établissements Michelin Société en commandite par actions Insiders Aligned With All Shareholders?

Owing to the size of Compagnie Générale des Établissements Michelin Société en commandite par actions, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. To be specific, they have €28m worth of shares. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Compagnie Générale des Établissements Michelin Société en commandite par actions, with market caps over €7.4b, is around €4.4m.

Compagnie Générale des Établissements Michelin Société en commandite par actions' CEO took home a total compensation package worth €2.8m in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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 Compagnie Générale des Établissements Michelin Société en commandite par actions Deserve A Spot On Your Watchlist?

One positive for Compagnie Générale des Établissements Michelin Société en commandite par actions is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for Compagnie Générale des Établissements Michelin Société en commandite par actions, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Still, you should learn about the 1 warning sign we've spotted with Compagnie Générale des Établissements Michelin Société en commandite par actions.

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 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.