With EPS Growth And More, QUALCOMM (NASDAQ:QCOM) Makes An Interesting Case

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 QUALCOMM (NASDAQ:QCOM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide QUALCOMM with the means to add long-term value to shareholders.

See our latest analysis for QUALCOMM

QUALCOMM's Improving Profits

QUALCOMM has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. QUALCOMM's EPS skyrocketed from US$8.13 to US$11.45, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 41%.

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. The music to the ears of QUALCOMM shareholders is that EBIT margins have grown from 32% to 36% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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

Are QUALCOMM Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$136b company like QUALCOMM. 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$157m. This comes in at 0.1% of shares in the company, which is a fair amount of a business of this size. This still shows shareholders there is a degree of alignment between management and themselves.

Is QUALCOMM Worth Keeping An Eye On?

You can't deny that QUALCOMM has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in QUALCOMM's 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. However, before you get too excited we've discovered 2 warning signs for QUALCOMM (1 is a bit unpleasant!) that you should be aware of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.