If EPS Growth Is Important To You, Balchem (NASDAQ:BCPC) Presents An Opportunity

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

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 Balchem (NASDAQ:BCPC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Balchem

Balchem's Earnings Per Share Are 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. Over the last three years, Balchem has grown EPS by 8.9% per year. That's a pretty good rate, if the company can sustain it.

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 Balchem is pretty stable, since revenue and EBIT margins are pretty flat year on year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.

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.

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

Are Balchem Insiders Aligned With All Shareholders?

Owing to the size of Balchem, 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. To be specific, they have US$41m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between US$4.0b and US$12b, like Balchem, the median CEO pay is around US$7.8m.

The Balchem CEO received US$5.9m in compensation for the year ending December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does Balchem Deserve A Spot On Your Watchlist?

One positive for Balchem is that it is growing EPS. That's nice to see. Earnings growth might be the main attraction for Balchem, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. If you think Balchem might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Although Balchem certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.