Do eBay's (NASDAQ:EBAY) Earnings Warrant Your Attention?

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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in eBay (NASDAQ:EBAY). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide eBay with the means to add long-term value to shareholders.

See our latest analysis for eBay

eBay'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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, eBay has grown EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for eBay remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 3.4% to US$10b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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

Are eBay Insiders Aligned With All Shareholders?

Owing to the size of eBay, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. With a whopping US$78m worth of shares as a group, insiders have plenty riding on the company's success. This should keep them focused on creating long term value for shareholders.

Does eBay Deserve A Spot On Your Watchlist?

One important encouraging feature of eBay is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. The combination definitely favoured by investors so consider keeping the company on a watchlist. We don't want to rain on the parade too much, but we did also find 4 warning signs for eBay (1 is a bit concerning!) that you need to be mindful of.

Although eBay certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.