If EPS Growth Is Important To You, Recordati Industria Chimica e Farmaceutica (BIT:REC) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Recordati Industria Chimica e Farmaceutica (BIT:REC). 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.

Check out our latest analysis for Recordati Industria Chimica e Farmaceutica

How Fast Is Recordati Industria Chimica e Farmaceutica Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So EPS growth can certainly encourage an investor to take note of a stock. Recordati Industria Chimica e Farmaceutica's EPS has risen over the last 12 months, growing from €1.52 to €1.89. This amounts to a 24% 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. While we note Recordati Industria Chimica e Farmaceutica achieved similar EBIT margins to last year, revenue grew by a solid 12% to €2.1b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Recordati Industria Chimica e Farmaceutica?

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

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Recordati Industria Chimica e Farmaceutica, with market caps over €7.4b, is around €4.0m.

Recordati Industria Chimica e Farmaceutica's CEO took home a total compensation package worth €2.2m in the year leading up to December 2022. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Recordati Industria Chimica e Farmaceutica Deserve A Spot On Your Watchlist?

One positive for Recordati Industria Chimica e Farmaceutica is that it is growing EPS. That's nice to see. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. So based on its merits, the stock deserves further research, if not an addition to your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Recordati Industria Chimica e Farmaceutica you should know about.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in IT with promising growth potential and insider confidence.

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.