Do Comerica's (NYSE:CMA) 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. 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.

In contrast to all that, many investors prefer to focus on companies like Comerica (NYSE:CMA), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Comerica with the means to add long-term value to shareholders.

Check out our latest analysis for Comerica

Comerica's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Comerica has managed to grow EPS by 21% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Not all of Comerica's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Comerica achieved similar EBIT margins to last year, revenue grew by a solid 18% to US$3.7b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

Are Comerica Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that Comerica insiders have a significant amount of capital invested in the stock. To be specific, they have US$19m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Comerica To Your Watchlist?

You can't deny that Comerica has grown its earnings per share at a very impressive rate. That's attractive. 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. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. You should always think about risks though. Case in point, we've spotted 2 warning signs for Comerica you should be aware of, and 1 of them makes us a bit uncomfortable.

Although Comerica certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.