With EPS Growth And More, Compass Group (LON:CPG) Makes An Interesting Case

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Compass Group (LON:CPG), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Compass Group

How Fast Is Compass Group Growing Its Earnings Per Share?

Compass 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. So it would be better to isolate the growth rate over the last year for our analysis. Compass Group's EPS has risen over the last 12 months, growing from UK£0.63 to UK£0.77. This amounts to a 23% gain; a figure that shareholders will be pleased to see.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Compass Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 22% to UK£31b. 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 Compass Group's future EPS 100% free.

Are Compass Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a UK£36b company like Compass Group. But we are reassured by the fact they have invested in the company. To be specific, they have UK£16m worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 0.04% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Compass Group Worth Keeping An Eye On?

One important encouraging feature of Compass Group is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. Even so, be aware that Compass Group is showing 1 warning sign in our investment analysis , you should know about...

Although Compass Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of British companies that not only boast of strong growth but have also seen recent insider buying..

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.