If EPS Growth Is Important To You, Equinix (NASDAQ:EQIX) Presents An Opportunity

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Equinix (NASDAQ:EQIX). 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 the opportunities and risks within the US REITs industry.

Equinix's Earnings Per Share Are 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Equinix has grown EPS by 8.3% per year. That's a good rate of growth, if it can be sustained.

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. It's noted that Equinix's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Equinix shareholders can take confidence from the fact that EBIT margins are up from 8.6% to 11%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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

Are Equinix Insiders Aligned With All Shareholders?

Since Equinix has a market capitalisation of US$61b, we wouldn't expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth US$186m. While that is a lot of skin in the game, we note this holding only totals to 0.3% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.

Is Equinix Worth Keeping An Eye On?

One important encouraging feature of Equinix is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. It is worth noting though that we have found 4 warning signs for Equinix (1 shouldn't be ignored!) that you need to take into consideration.

Although Equinix certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.