If EPS Growth Is Important To You, Royal Caribbean Cruises (NYSE:RCL) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Royal Caribbean Cruises (NYSE:RCL). 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.

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Royal Caribbean Cruises' Improving Profits

In the last three years Royal Caribbean Cruises' 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. So it would be better to isolate the growth rate over the last year for our analysis. Royal Caribbean Cruises' EPS skyrocketed from US$6.63 to US$10.69, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 61%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Royal Caribbean Cruises shareholders is that EBIT margins have grown from 21% to 25% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Check out our latest analysis for Royal Caribbean Cruises

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 Royal Caribbean Cruises?

Are Royal Caribbean Cruises Insiders Aligned With All Shareholders?

Since Royal Caribbean Cruises has a market capitalisation of US$52b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$184m. While that is a lot of skin in the game, we note this holding only totals to 0.4% of the business, which is a result of the company being so large. This still shows shareholders there is a degree of alignment between management and themselves.

Should You Add Royal Caribbean Cruises To Your Watchlist?

You can't deny that Royal Caribbean Cruises has grown its earnings per share at a very impressive rate. That's attractive. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. What about risks? Every company has them, and we've spotted 2 warning signs for Royal Caribbean Cruises you should know about.

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.