Do Churchill Downs' (NASDAQ:CHDN) Earnings Warrant Your Attention?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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 Churchill Downs (NASDAQ:CHDN). 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.

Check out our latest analysis for Churchill Downs

How Fast Is Churchill Downs Growing Its Earnings Per Share?

In the last three years Churchill Downs' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Churchill Downs' EPS shot from US$3.32 to US$7.39, over the last year. Year on year growth of 123% is certainly a sight to behold.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of Churchill Downs shareholders is that EBIT margins have grown from 19% to 23% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. 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 Churchill Downs?

Are Churchill Downs Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

With strong conviction, Churchill Downs insiders have stood united by refusing to sell shares over the last year. But the real excitement comes from the US$93k that Independent Chairman of the Board R. Rankin spent buying shares (at an average price of about US$88.40). Purchases like this clue us in to the to the faith management has in the business' future.

Along with the insider buying, another encouraging sign for Churchill Downs is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth US$153m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Churchill Downs Deserve A Spot On Your Watchlist?

Churchill Downs' earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Churchill Downs belongs near the top of your watchlist. You still need to take note of risks, for example - Churchill Downs has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Churchill Downs, you'll probably love this free list of growing companies that insiders are 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.