With EPS Growth And More, Banco Comercial Português (ELI:BCP) Makes An Interesting Case

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. 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.

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 Banco Comercial Português (ELI:BCP). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Banco Comercial Português

Banco Comercial Português' Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It is awe-striking that Banco Comercial Português' EPS went from €0.011 to €0.057 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. This could point to the business hitting a point of inflection.

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. It's noted that Banco Comercial Português' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Banco Comercial Português achieved similar EBIT margins to last year, revenue grew by a solid 35% to €3.5b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Banco Comercial Português' forecast profits?

Are Banco Comercial Português 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. For companies with market capitalisations between €3.7b and €11b, like Banco Comercial Português, the median CEO pay is around €2.2m.

Banco Comercial Português offered total compensation worth €1.2m to its CEO in the year to December 2023. That seems pretty reasonable, especially given it's below the median for similar 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 good governance, more generally.

Should You Add Banco Comercial Português To Your Watchlist?

Banco Comercial Português' earnings have taken off in quite an impressive fashion. Such fast EPS growth prompts the question: has the business reached an inflection point? Meanwhile, the very reasonable CEO pay is a great reassurance, since it points to an absence of wasteful spending habits. It will definitely require further research to be sure, but it does seem that Banco Comercial Português has the hallmarks of a quality business; and that would make it well worth watching. Now, you could try to make up your mind on Banco Comercial Português by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

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 PT 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.