With EPS Growth And More, Xcel Energy (NASDAQ:XEL) Makes An Interesting Case

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Xcel Energy (NASDAQ:XEL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Xcel Energy with the means to add long-term value to shareholders.

View our latest analysis for Xcel Energy

Xcel Energy's Earnings Per Share Are Growing

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. That makes EPS growth an attractive quality for any company. Over the last three years, Xcel Energy has grown EPS by 4.4% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. Despite consistency in EBIT margins year on year, Xcel Energy has actually recorded a dip in revenue. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.

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.

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In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Xcel Energy's forecast profits?

Are Xcel Energy Insiders Aligned With All Shareholders?

Since Xcel Energy has a market capitalisation of US$40b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at US$30m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.08% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Xcel Energy To Your Watchlist?

One important encouraging feature of Xcel Energy is that it is growing profits. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. However, before you get too excited we've discovered 2 warning signs for Xcel Energy (1 makes us a bit uncomfortable!) that you should be aware of.

Although Xcel Energy certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.