If EPS Growth Is Important To You, Comfort Systems USA (NYSE:FIX) 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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Comfort Systems USA (NYSE:FIX). 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 Comfort Systems USA

Comfort Systems USA's Earnings Per Share Are 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 makes EPS growth an attractive quality for any company. Impressively, Comfort Systems USA has grown EPS by 30% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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 Comfort Systems USA achieved similar EBIT margins to last year, revenue grew by a solid 26% to US$5.2b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Comfort Systems USA's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Comfort Systems USA Insiders Aligned With All Shareholders?

Since Comfort Systems USA has a market capitalisation of US$11b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$170m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations over US$8.0b, like Comfort Systems USA, the median CEO pay is around US$12m.

The Comfort Systems USA CEO received total compensation of just US$5.4m in the year to December 2022. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Comfort Systems USA Worth Keeping An Eye On?

For growth investors, Comfort Systems USA's raw rate of earnings growth is a beacon in the night. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. This may only be a fast rundown, but the key takeaway is that Comfort Systems USA is worth keeping an eye on. It is worth noting though that we have found 1 warning sign for Comfort Systems USA that you need to take into consideration.

Although Comfort Systems USA certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..

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.