If EPS Growth Is Important To You, Archer-Daniels-Midland (NYSE:ADM) 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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

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 Archer-Daniels-Midland (NYSE:ADM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Archer-Daniels-Midland with the means to add long-term value to shareholders.

View our latest analysis for Archer-Daniels-Midland

How Fast Is Archer-Daniels-Midland Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Archer-Daniels-Midland's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 48%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Archer-Daniels-Midland remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 19% to US$102b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Archer-Daniels-Midland's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Archer-Daniels-Midland Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$46b company like Archer-Daniels-Midland. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$246m. We note that this amounts to 0.5% of the company, which may be small owing to the sheer size of Archer-Daniels-Midland but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Is Archer-Daniels-Midland Worth Keeping An Eye On?

Archer-Daniels-Midland's earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Archer-Daniels-Midland very closely. It is worth noting though that we have found 1 warning sign for Archer-Daniels-Midland that you need to take into consideration.

Although Archer-Daniels-Midland certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.