Should You Be Adding Koninklijke Philips (AMS:PHIA) To Your Watchlist Today?

Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Koninklijke Philips (AMS:PHIA). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Koninklijke Philips

How Fast Is Koninklijke Philips Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Who among us would not applaud Koninklijke Philips's stratospheric annual EPS growth of 56%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Koninklijke Philips's EBIT margins were flat over the last year, revenue grew by a solid 3.6% to €18b. That's progress.

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.

Fortunately, we've got access to analyst forecasts of Koninklijke Philips's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Koninklijke Philips Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a €35b company like Koninklijke Philips. But we are reassured by the fact they have invested in the company. To be specific, they have €35m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 0.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Koninklijke Philips Deserve A Spot On Your Watchlist?

Koninklijke Philips's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Koninklijke Philips is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. If you think Koninklijke Philips might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.

Although Koninklijke Philips certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.