Do United Therapeutics' (NASDAQ:UTHR) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 United Therapeutics (NASDAQ:UTHR). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

United Therapeutics' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that United Therapeutics' EPS has grown 36% each year, compound, 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. United Therapeutics maintained stable EBIT margins over the last year, all while growing revenue 24% to US$2.9b. That's a real positive.

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.

Check out our latest analysis for United Therapeutics

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

Are United Therapeutics Insiders Aligned With All Shareholders?

Since United Therapeutics has a market capitalisation of US$14b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$236m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Is United Therapeutics Worth Keeping An Eye On?

For growth investors, United Therapeutics' raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in United Therapeutics' continuing strength. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if United Therapeutics is trading on a high P/E or a low P/E , relative to its industry.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.