Do Recordati Industria Chimica e Farmaceutica's (BIT:REC) 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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

In contrast to all that, many investors prefer to focus on companies like Recordati Industria Chimica e Farmaceutica (BIT:REC), 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.

See our latest analysis for Recordati Industria Chimica e Farmaceutica

Recordati Industria Chimica e Farmaceutica's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Recordati Industria Chimica e Farmaceutica grew its EPS by 4.2% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. EBIT margins for Recordati Industria Chimica e Farmaceutica remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to €2.3b. That's encouraging news for the company!

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.

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

Are Recordati Industria Chimica e Farmaceutica Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Recordati Industria Chimica e Farmaceutica, with market caps over €7.6b, is around €2.8m.

Recordati Industria Chimica e Farmaceutica's CEO took home a total compensation package worth €2.5m in the year leading up to December 2023. That is actually below the median for CEO's of similarly 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 good governance, more generally.

Should You Add Recordati Industria Chimica e Farmaceutica To Your Watchlist?

As previously touched on, Recordati Industria Chimica e Farmaceutica is a growing business, which is encouraging. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. All things considered, Recordati Industria Chimica e Farmaceutica is definitely worth taking a deeper dive into. We don't want to rain on the parade too much, but we did also find 1 warning sign for Recordati Industria Chimica e Farmaceutica that you need to be mindful of.

Although Recordati Industria Chimica e Farmaceutica 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 Italian 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.