Do Qualys' (NASDAQ:QLYS) 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. 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.

In contrast to all that, many investors prefer to focus on companies like Qualys (NASDAQ:QLYS), which has not only revenues, but also profits. 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.

See our latest analysis for Qualys

Qualys' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Over the last three years, Qualys has grown EPS by 17% per year. That's a good rate of growth, if it can be sustained.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. On the revenue front, Qualys has done well over the past year, growing revenue by 19% to US$507m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Qualys.

Are Qualys Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Qualys followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at US$19m. That's a lot of money, and no small incentive to work hard. Despite being just 0.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Qualys Deserve A Spot On Your Watchlist?

One important encouraging feature of Qualys 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. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. Of course, just because Qualys is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Although Qualys 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.