Here's Why We Think Sensient Technologies (NYSE:SXT) Is Well Worth Watching

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

How Fast Is Sensient Technologies Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, Sensient Technologies has grown EPS by 20% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Sensient Technologies maintained stable EBIT margins over the last year, all while growing revenue 4.1% to US$1.4b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Sensient Technologies' forecast profits?

Are Sensient Technologies Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Sensient Technologies shares, in the last year. Add in the fact that Sharad Jain, the company insider of the company, paid US$39k for shares at around US$78.11 each. It seems that at least one insider is prepared to show the market there is potential within Sensient Technologies.

The good news, alongside the insider buying, for Sensient Technologies bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$42m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 1.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Sensient Technologies Deserve A Spot On Your Watchlist?

You can't deny that Sensient Technologies has grown its earnings per share at a very impressive rate. That's attractive. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 2 warning signs for Sensient Technologies (1 doesn't sit too well with us!) that we have uncovered.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Sensient Technologies, 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.