Should You Be Adding Patterson Companies (NASDAQ:PDCO) To Your Watchlist Today?

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 currently lacks a track record of revenue and profit. 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 Patterson Companies (NASDAQ:PDCO). 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.

Check out our latest analysis for Patterson Companies

How Fast Is Patterson Companies Growing Its Earnings Per Share?

Patterson Companies 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. It's good to see that Patterson Companies' EPS has grown from US$1.99 to US$2.23 over twelve months. That's a 12% gain; respectable growth in the broader scheme of things.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It seems Patterson Companies is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.

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.

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 Patterson Companies?

Are Patterson Companies Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Patterson Companies shares worth a considerable sum. Indeed, they hold US$20m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.7%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between US$2.0b and US$6.4b, like Patterson Companies, the median CEO pay is around US$6.7m.

Patterson Companies' CEO took home a total compensation package worth US$5.5m in the year leading up to April 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Patterson Companies Worth Keeping An Eye On?

One important encouraging feature of Patterson Companies is that it is growing profits. The growth of EPS may be the eye-catching headline for Patterson Companies, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. We should say that we've discovered 3 warning signs for Patterson Companies (2 are potentially serious!) that you should be aware of before investing here.

Although Patterson Companies 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.