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 currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Shift4 Payments (NYSE:FOUR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shift4 Payments with the means to add long-term value to shareholders.
View our latest analysis for Shift4 Payments
Shift4 Payments' Improving Profits
Shift4 Payments 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. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Shift4 Payments' EPS shot from US$0.61 to US$1.72, over the last year. It's not often a company can achieve year-on-year growth of 181%. That could be a sign that the business has reached a true inflection point.
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. The good news is that Shift4 Payments is growing revenues, and EBIT margins improved by 3.6 percentage points to 7.0%, over the last year. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Shift4 Payments' forecast profits?
Are Shift4 Payments Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shift4 Payments followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. We note that their impressive stake in the company is worth US$144m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
Does Shift4 Payments Deserve A Spot On Your Watchlist?
Shift4 Payments' earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Shift4 Payments very closely. Still, you should learn about the 1 warning sign we've spotted with Shift4 Payments.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.