Do GoDaddy's (NYSE:GDDY) Earnings Warrant Your Attention?

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like GoDaddy (NYSE:GDDY). 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 GoDaddy

How Fast Is GoDaddy Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that GoDaddy's EPS went from US$2.10 to US$12.71 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. The good news is that GoDaddy is growing revenues, and EBIT margins improved by 4.7 percentage points to 18%, over the last year. Both of which are great metrics to check off for potential growth.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for GoDaddy's future EPS 100% free.

Are GoDaddy Insiders Aligned With All Shareholders?

Owing to the size of GoDaddy, we wouldn't expect insiders to hold a significant proportion of the company. 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. Holding US$82m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.

Is GoDaddy Worth Keeping An Eye On?

GoDaddy's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, GoDaddy is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You still need to take note of risks, for example - GoDaddy has 4 warning signs (and 2 which can't be ignored) we think you should know about.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.