Do NetScout Systems' (NASDAQ:NTCT) Earnings Warrant Your Attention?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. 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 NetScout Systems (NASDAQ:NTCT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide NetScout Systems with the means to add long-term value to shareholders.

See our latest analysis for NetScout Systems

NetScout Systems' Improving Profits

NetScout Systems 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. Thus, it makes sense to focus on more recent growth rates, instead. NetScout Systems' EPS shot up from US$0.50 to US$0.69; a result that's bound to keep shareholders happy. That's a fantastic gain of 37%.

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. NetScout Systems maintained stable EBIT margins over the last year, all while growing revenue 5.4% to US$890m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed 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 NetScout Systems' future EPS 100% free.

Are NetScout Systems Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own NetScout Systems shares worth a considerable sum. Notably, they have an enviable stake in the company, worth US$122m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to NetScout Systems, with market caps between US$1.0b and US$3.2b, is around US$5.6m.

NetScout Systems' CEO took home a total compensation package worth US$3.9m in the year leading up to March 2022. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add NetScout Systems To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into NetScout Systems' strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes NetScout Systems look rather interesting indeed. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of NetScout Systems. You might benefit from giving it a glance today.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.