If EPS Growth Is Important To You, W. R. Berkley (NYSE:WRB) Presents An Opportunity

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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like W. R. Berkley (NYSE:WRB). 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.

Our analysis indicates that WRB is potentially undervalued!

How Fast Is W. R. Berkley Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that W. R. Berkley has managed to grow EPS by 26% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Our analysis has highlighted that W. R. Berkley's revenue from operations did not account for all of their revenue last year, so our analysis of its margins might not accurately reflect the underlying business. W. R. Berkley maintained stable EBIT margins over the last year, all while growing revenue 17% to US$11b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. 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 W. R. Berkley?

Are W. R. Berkley Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$19b company like W. R. Berkley. 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$4.1b. Coming in at 21% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Looking very optimistic for investors.

Should You Add W. R. Berkley To Your Watchlist?

You can't deny that W. R. Berkley has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. 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. Of course, just because W. R. Berkley is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

The beauty of investing is that you can invest in almost 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.

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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.