Here's Why We Think Ramsay Générale de Santé (EPA:GDS) Is Well Worth Watching

By
Simply Wall St
Published
October 29, 2021
ENXTPA:GDS
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Ramsay Générale de Santé (EPA:GDS). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

See our latest analysis for Ramsay Générale de Santé

How Fast Is Ramsay Générale de Santé 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 the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Ramsay Générale de Santé's EPS went from €0.12 to €0.59 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Ramsay Générale de Santé maintained stable EBIT margins over the last year, all while growing revenue 7.4% to €4.0b. 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.

earnings-and-revenue-history
ENXTPA:GDS Earnings and Revenue History October 30th 2021

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Ramsay Générale de Santé's balance sheet strength, before getting too excited.

Are Ramsay Générale de Santé Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Ramsay Générale de Santé insiders have a significant amount of capital invested in the stock. Indeed, they hold €18m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Ramsay Générale de Santé with market caps between €1.7b and €5.5b is about €1.4m.

The CEO of Ramsay Générale de Santé only received €612k in total compensation for the year ending . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. 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. It can also be a sign of good governance, more generally.

Should You Add Ramsay Générale de Santé To Your Watchlist?

Ramsay Générale de Santé's earnings have taken off like any random crypto-currency did, back in 2017. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Ramsay Générale de Santé certainly ticks a few of my boxes, so I think it's probably well worth further consideration. We should say that we've discovered 1 warning sign for Ramsay Générale de Santé that you should be aware of before investing here.

Although Ramsay Générale de Santé certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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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