Here's Why We Think Emerson Electric (NYSE:EMR) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 Emerson Electric (NYSE:EMR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Emerson Electric with the means to add long-term value to shareholders.

See our latest analysis for Emerson Electric

How Fast Is Emerson Electric Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Emerson Electric has grown EPS by 15% per year. That's a pretty good rate, if the company can sustain it.

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. Emerson Electric maintained stable EBIT margins over the last year, all while growing revenue 7.7% to US$19b. That's a real positive.

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.

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

Are Emerson Electric Insiders Aligned With All Shareholders?

Owing to the size of Emerson Electric, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$358m. While that is a lot of skin in the game, we note this holding only totals to 0.7% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Does Emerson Electric Deserve A Spot On Your Watchlist?

One positive for Emerson Electric 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. These two factors are a huge highlight for the company which should be a strong contender your watchlists. Before you take the next step you should know about the 1 warning sign for Emerson Electric that we have uncovered.

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 free list of them here.

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.