Here's Why I Think Virbac (EPA:VIRP) Is An Interesting Stock

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Virbac (EPA:VIRP), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Virbac

How Fast Is Virbac Growing Its Earnings Per Share?

In the last three years Virbac's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Virbac's EPS shot from €8.57 to €19.31, over the last year. Year on year growth of 125% is certainly a sight to behold.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Virbac maintained stable EBIT margins over the last year, all while growing revenue 3.4% to €985m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

Are Virbac Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Virbac insiders own a meaningful share of the business. Actually, with 50% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. At the current share price, that insider holding is worth a whopping €1.8b. Now that's what I call some serious skin in the game!

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 Virbac with market caps between €1.8b and €5.7b is about €1.5m.

The CEO of Virbac only received €580k 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Virbac Worth Keeping An Eye On?

Virbac's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. 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. Virbac certainly ticks a few of my boxes, so I think it's probably well worth further consideration. What about risks? Every company has them, and we've spotted 1 warning sign for Virbac you should know about.

Although Virbac 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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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.