Does Charles River Laboratories International (NYSE:CRL) Deserve A Spot On Your Watchlist?

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. 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 Charles River Laboratories International (NYSE:CRL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Charles River Laboratories International

How Fast Is Charles River Laboratories International Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Charles River Laboratories International has managed to grow EPS by 24% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Charles River Laboratories International achieved similar EBIT margins to last year, revenue grew by a solid 13% to US$4.1b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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

Are Charles River Laboratories International 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. 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.

While some insiders did sell some of their holdings in Charles River Laboratories International, one lone insider trumped that with significant stock purchases. Namely, Independent Director Richard Wallman out-laid US$715k for shares, at about US$220 per share. That certainly piques our interest.

The good news, alongside the insider buying, for Charles River Laboratories International bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth US$113m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Does Charles River Laboratories International Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Charles River Laboratories International's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. We don't want to rain on the parade too much, but we did also find 2 warning signs for Charles River Laboratories International that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Charles River Laboratories International, 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.