If EPS Growth Is Important To You, Ralph Lauren (NYSE:RL) 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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Ralph Lauren (NYSE:RL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Ralph Lauren

How Fast Is Ralph Lauren Growing Its Earnings Per Share?

Ralph Lauren has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. Ralph Lauren's EPS skyrocketed from US$7.97 to US$11.02, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 38%.

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. Ralph Lauren shareholders can take confidence from the fact that EBIT margins are up from 9.1% to 12%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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.

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 Ralph Lauren?

Are Ralph Lauren Insiders Aligned With All Shareholders?

Owing to the size of Ralph Lauren, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$3.3b. This totals to 32% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Looking very optimistic for investors.

Should You Add Ralph Lauren To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Ralph Lauren's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Ralph Lauren's continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Ralph Lauren that you should be aware of.

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 the US 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.