For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. 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.
In contrast to all that, I prefer to spend time on companies like LVMH Moët Hennessy - Louis Vuitton Société Européenne (EPA:MC), which has not only revenues, but also profits. 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.
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How Quickly Is LVMH Moët Hennessy - Louis Vuitton Société Européenne Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that LVMH Moët Hennessy - Louis Vuitton Société Européenne has managed to grow EPS by 21% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note LVMH Moët Hennessy - Louis Vuitton Société Européenne's EBIT margins were flat over the last year, revenue grew by a solid 9.8% to €47b. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of LVMH Moët Hennessy - Louis Vuitton Société Européenne's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are LVMH Moët Hennessy - Louis Vuitton Société Européenne Insiders Aligned With All Shareholders?
Since LVMH Moët Hennessy - Louis Vuitton Société Européenne has a market capitalization of €169b, 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. Indeed, they have a glittering mountain of wealth invested in it, currently valued at €668m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Does LVMH Moët Hennessy - Louis Vuitton Société Européenne Deserve A Spot On Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about LVMH Moët Hennessy - Louis Vuitton Société Européenne's strong EPS growth. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. 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 LVMH Moët Hennessy - Louis Vuitton Société Européenne. You might benefit from giving it a glance today.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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
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 email@example.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.