Should You Be Adding InterDigital (NASDAQ:IDCC) To Your Watchlist Today?

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. 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.

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 InterDigital (NASDAQ:IDCC). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for InterDigital

How Fast Is InterDigital Growing Its Earnings Per Share?

In the last three years InterDigital's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, InterDigital's EPS grew from US$2.85 to US$6.88, over the previous 12 months. Year on year growth of 142% is certainly a sight to behold.

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. InterDigital shareholders can take confidence from the fact that EBIT margins are up from 33% to 41%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

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

Are InterDigital Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that InterDigital insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at US$50m. That's a lot of money, and no small incentive to work hard. Despite being just 2.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add InterDigital To Your Watchlist?

InterDigital's earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering InterDigital for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for InterDigital you should be aware of.

Although InterDigital 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.