If EPS Growth Is Important To You, Hyatt Hotels (NYSE:H) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Hyatt Hotels (NYSE:H). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Hyatt Hotels' Improving Profits

Hyatt Hotels 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. Hyatt Hotels' EPS shot up from US$6.58 to US$8.32; a result that's bound to keep shareholders happy. That's a commendable gain of 26%.

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. Not all of Hyatt Hotels' revenue last year was revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Unfortunately, Hyatt Hotels' revenue dropped 9.9% last year, but the silver lining is that EBIT margins improved from 8.4% to 15%. That falls short of ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Check out our latest analysis for Hyatt Hotels

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Hyatt Hotels' future EPS 100% free.

Are Hyatt Hotels Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$14b company like Hyatt Hotels. 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. We note that their impressive stake in the company is worth US$1.3b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is Hyatt Hotels Worth Keeping An Eye On?

For growth investors, Hyatt Hotels' raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. We don't want to rain on the parade too much, but we did also find 3 warning signs for Hyatt Hotels (2 don't sit too well with us!) that you need to be mindful of.

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 tailored list of companies which have demonstrated growth backed by significant insider holdings.

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.