We Ran A Stock Scan For Earnings Growth And Hewlett Packard Enterprise (NYSE:HPE) Passed With Ease

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Hewlett Packard Enterprise (NYSE:HPE), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Hewlett Packard Enterprise

How Quickly Is Hewlett Packard Enterprise Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Hewlett Packard Enterprise grew its EPS by 6.5% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Hewlett Packard Enterprise's EBIT margins are flat but, worryingly, its revenue is actually down. While this may raise concerns, investors should investigate the reasoning behind this.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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 Hewlett Packard Enterprise's future EPS 100% free.

Are Hewlett Packard Enterprise Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$22b company like Hewlett Packard Enterprise. But we are reassured by the fact they have invested in the company. With a whopping US$87m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Does Hewlett Packard Enterprise Deserve A Spot On Your Watchlist?

One positive for Hewlett Packard Enterprise is that it is growing EPS. That's nice to see. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. It is worth noting though that we have found 3 warning signs for Hewlett Packard Enterprise that you need to take into consideration.

Although Hewlett Packard Enterprise certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..

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.