If EPS Growth Is Important To You, Wells Fargo (NYSE:WFC) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Wells Fargo (NYSE:WFC), which has not only revenues, but also profits. 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.

See our latest analysis for Wells Fargo

How Fast Is Wells Fargo Growing Its Earnings Per Share?

Over the last three years, Wells Fargo has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Wells Fargo boosted its trailing twelve month EPS from US$3.95 to US$4.74, in the last year. There's little doubt shareholders would be happy with that 20% gain.

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. Our analysis has highlighted that Wells Fargo's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Wells Fargo achieved similar EBIT margins to last year, revenue grew by a solid 2.0% to US$76b. 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.

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 Wells Fargo?

Are Wells Fargo Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$155b company like Wells Fargo. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$116m. We note that this amounts to 0.07% of the company, which may be small owing to the sheer size of Wells Fargo but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Does Wells Fargo Deserve A Spot On Your Watchlist?

One positive for Wells Fargo is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Wells Fargo you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.