If EPS Growth Is Important To You, ASML Holding (AMS:ASML) 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in ASML Holding (AMS:ASML). 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.

View our latest analysis for ASML Holding

How Quickly Is ASML Holding Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, ASML Holding has grown EPS by 34% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. While we note ASML Holding achieved similar EBIT margins to last year, revenue grew by a solid 36% to €27b. 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. To see the actual numbers, click on the chart.

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 ASML Holding's future EPS 100% free.

Are ASML Holding Insiders Aligned With All Shareholders?

Owing to the size of ASML Holding, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Given insiders own a significant chunk of shares, currently valued at €69m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Is ASML Holding Worth Keeping An Eye On?

For growth investors, ASML Holding's raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. What about risks? Every company has them, and we've spotted 2 warning signs for ASML Holding (of which 1 is a bit concerning!) you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Dutch companies which have demonstrated growth backed by recent insider purchases.

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.