I Built A List Of Growing Companies And Progressive (NYSE:PGR) Made The Cut

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Progressive (NYSE:PGR), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Progressive

How Quickly Is Progressive Increasing Earnings Per Share?

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). It's no surprise, then, that I like to invest in companies with EPS growth. I, for one, am blown away by the fact that Progressive has grown EPS by 47% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for 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. Progressive maintained stable EBIT margins over the last year, all while growing revenue 17% to US$36b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time.

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

Are Progressive Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$43b company like Progressive. But we do take comfort from the fact that they are investors in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$140m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

Should You Add Progressive To Your Watchlist?

Progressive's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Progressive for a spot on your watchlist. Now, you could try to make up your mind on Progressive by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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