If You Like EPS Growth Then Check Out Ramsay Générale de Santé (EPA:GDS) Before It's Too Late

By
Simply Wall St
Published
February 02, 2022
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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Ramsay Générale de Santé (EPA:GDS). 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.

Check out our latest analysis for Ramsay Générale de Santé

How Fast Is Ramsay Générale de Santé Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect 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 Ramsay Générale de Santé's EPS went from €0.12 to €0.59 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.

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. The good news is that Ramsay Générale de Santé is growing revenues, and EBIT margins improved by 4.7 percentage points to 9.7%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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.

earnings-and-revenue-history
ENXTPA:GDS Earnings and Revenue History February 2nd 2022

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. As a result, I'm encouraged by the fact that insiders own Ramsay Générale de Santé shares worth a considerable sum. To be specific, they have €18m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Ramsay Générale de Santé Deserve A Spot On Your Watchlist?

Ramsay Générale de Santé's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Ramsay Générale de Santé for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Ramsay Générale de Santé you should be aware of, and 1 of them is a bit unpleasant.

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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