Here's Why We Think Shift4 Payments (NYSE:FOUR) Might Deserve Your Attention Today

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Shift4 Payments (NYSE:FOUR). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Shift4 Payments

How Fast Is Shift4 Payments Growing Its Earnings Per Share?

Over the last three years, Shift4 Payments has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Impressively, Shift4 Payments' EPS catapulted from US$0.59 to US$1.74, over the last year. Year on year growth of 196% is certainly a sight to behold. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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. Shift4 Payments shareholders can take confidence from the fact that EBIT margins are up from 3.9% to 6.3%, and revenue is growing. 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. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Shift4 Payments.

Are Shift4 Payments Insiders Aligned With All Shareholders?

Owing to the size of Shift4 Payments, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$182m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Does Shift4 Payments Deserve A Spot On Your Watchlist?

Shift4 Payments' earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Shift4 Payments is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You should always think about risks though. Case in point, we've spotted 2 warning signs for Shift4 Payments you should be aware 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 free list of them here.

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.