Do Whitbread's (LON:WTB) Earnings Warrant Your Attention?

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Whitbread (LON:WTB). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Whitbread

How Fast Is Whitbread Growing Its Earnings Per Share?

Whitbread 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. Thus, it makes sense to focus on more recent growth rates, instead. Whitbread boosted its trailing twelve month EPS from UK£1.55 to UK£1.82, in the last year. That's a 17% gain; respectable growth in the broader scheme of things.

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. The music to the ears of Whitbread shareholders is that EBIT margins have grown from 16% to 22% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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

Are Whitbread Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's nice to see that there have been no reports of any insiders selling shares in Whitbread in the previous 12 months. With that in mind, it's heartening that Funmibi Chima, the Independent Non-Executive Director of the company, paid UK£30k for shares at around UK£31.08 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

Does Whitbread Deserve A Spot On Your Watchlist?

As previously touched on, Whitbread is a growing business, which is encouraging. It's not easy for business to grow EPS, but Whitbread has shown the strengths to do just that. Despite there being a solitary insider adding to their holdings, it's enough to consider adding this to the watchlist. However, before you get too excited we've discovered 1 warning sign for Whitbread that you should be aware of.

The good news is that Whitbread is not the only growth stock with insider buying. Here's a list of growth-focused companies in GB with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.