Do Experian's (LON:EXPN) Earnings Warrant Your Attention?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Experian (LON:EXPN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Experian

Experian's 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. Over the last three years, Experian has grown EPS by 6.8% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Experian remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 7.4% to US$7.3b. That's encouraging news for the company!

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

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Experian's future EPS 100% free.

Are Experian Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a UK£32b company like Experian. But we do take comfort from the fact that they are investors in the company. With a whopping US$60m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Does Experian Deserve A Spot On Your Watchlist?

As previously touched on, Experian is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Even so, be aware that Experian is showing 1 warning sign in our investment analysis , you should know about...

Although Experian certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of British companies that not only boast of strong growth but have strong insider backing.

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.