Does GoDaddy (NYSE:GDDY) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

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

View our latest analysis for GoDaddy

How Fast Is GoDaddy Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. GoDaddy's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 43%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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 2.6 percentage points to 13%, 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?

We would not expect to see insiders owning a large percentage of a US$12b company like GoDaddy. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at US$33m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is GoDaddy Worth Keeping An Eye On?

GoDaddy's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching GoDaddy very closely. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with GoDaddy (at least 1 which makes us a bit uncomfortable) , and understanding these should be part of your investment process.

Although GoDaddy 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.