With EPS Growth And More, Corteva (NYSE:CTVA) Makes An Interesting Case

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Corteva (NYSE:CTVA). 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 Corteva

How Fast Is Corteva Growing Its Earnings Per Share?

In the last three years Corteva's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Corteva's EPS skyrocketed from US$1.79 to US$2.45, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 37%.

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. The music to the ears of Corteva shareholders is that EBIT margins have grown from 13% to 15% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Corteva's future EPS 100% free.

Are Corteva Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Insider selling of Corteva shares was insignificant compared to the one buyer, over the last twelve months. To be exact, CEO & Director Charles Magro put their money where their mouth is, paying US$2.6m at an average of price of US$51.14 per share That certainly piques our interest.

On top of the insider buying, it's good to see that Corteva insiders have a valuable investment in the business. To be specific, they have US$25m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.06%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Corteva's CEO, Chuck Magro, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations over US$8.0b, like Corteva, the median CEO pay is around US$13m.

The Corteva CEO received total compensation of just US$2.1m in the year to December 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does Corteva Deserve A Spot On Your Watchlist?

For growth investors, Corteva's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. Astute investors will want to keep this stock on watch. We should say that we've discovered 1 warning sign for Corteva that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Corteva, you'll probably love this free list of growing companies that insiders are buying.

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.