I Ran A Stock Scan For Earnings Growth And Churchill Downs (NASDAQ:CHDN) Passed With Ease

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 completely 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.'

So if you're like me, you might be more interested in profitable, growing companies, like Churchill Downs (NASDAQ:CHDN). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Churchill Downs

Churchill Downs's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. We can see that in the last three years Churchill Downs grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Churchill Downs is growing revenues, and EBIT margins improved by 11.8 percentage points to 19%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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.

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

Are Churchill Downs Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it Churchill Downs shareholders can gain quiet confidence from the fact that insiders shelled out US$284k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. It is also worth noting that it was Independent Director Karole Lloyd who made the biggest single purchase, worth US$188k, paying US$188 per share.

The good news, alongside the insider buying, for Churchill Downs bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$371m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Churchill Downs To Your Watchlist?

One important encouraging feature of Churchill Downs is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. However, before you get too excited we've discovered 1 warning sign for Churchill Downs that you should be aware of.

The good news is that Churchill Downs is not the only growth stock with insider buying. Here's a list of them... 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.