With EPS Growth And More, Lloyds Banking Group (LON:LLOY) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Lloyds Banking Group (LON:LLOY). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Lloyds Banking Group with the means to add long-term value to shareholders.

View our latest analysis for Lloyds Banking Group

Lloyds Banking Group's Improving Profits

Lloyds Banking Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Lloyds Banking Group's EPS grew from UK£0.039 to UK£0.10, over the previous 12 months. It's a rarity to see 157% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. It's noted that Lloyds Banking Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Lloyds Banking Group achieved similar EBIT margins to last year, revenue grew by a solid 38% to UK£20b. That's progress.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Lloyds Banking Group's forecast profits?

Are Lloyds Banking Group Insiders Aligned With All Shareholders?

Since Lloyds Banking Group has a market capitalisation of UK£27b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Indeed, they hold UK£17m worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 0.06% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Lloyds Banking Group To Your Watchlist?

Lloyds Banking Group's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Lloyds Banking Group very closely. However, before you get too excited we've discovered 2 warning signs for Lloyds Banking Group (1 makes us a bit uncomfortable!) that you should be aware of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in GB with promising growth potential and insider confidence.

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.