Is Now The Time To Put GlaxoSmithKline Pharmaceuticals (NSE:GLAXO) On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like GlaxoSmithKline Pharmaceuticals (NSE:GLAXO). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide GlaxoSmithKline Pharmaceuticals with the means to add long-term value to shareholders.

View our latest analysis for GlaxoSmithKline Pharmaceuticals

GlaxoSmithKline Pharmaceuticals' 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. Impressively, GlaxoSmithKline Pharmaceuticals has grown EPS by 37% per year, compound, in the last three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.

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. GlaxoSmithKline Pharmaceuticals reported flat revenue and EBIT margins over the last year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.

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 GlaxoSmithKline Pharmaceuticals' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are GlaxoSmithKline Pharmaceuticals Insiders Aligned With All Shareholders?

Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to GlaxoSmithKline Pharmaceuticals, with market caps between ₹166b and ₹532b, is around ₹45m.

The GlaxoSmithKline Pharmaceuticals CEO received ₹34m in compensation for the year ending March 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add GlaxoSmithKline Pharmaceuticals To Your Watchlist?

You can't deny that GlaxoSmithKline Pharmaceuticals has grown its earnings per share at a very impressive rate. That's attractive. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. We think that based on its merits alone, this stock is worth watching into the future. You still need to take note of risks, for example - GlaxoSmithKline Pharmaceuticals has 1 warning sign we think you should be aware of.

Although GlaxoSmithKline Pharmaceuticals 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 Indian 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.