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

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in nVent Electric (NYSE:NVT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

nVent Electric's Improving Profits

In the last three years nVent Electric's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, nVent Electric's EPS soared from US$2.40 to US$3.42, over the last year. That's a commendable gain of 42%.

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. EBIT margins for nVent Electric remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to US$3.3b. 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.

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 nVent Electric's future EPS 100% free.

Are nVent Electric Insiders Aligned With All Shareholders?

Owing to the size of nVent Electric, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. As a matter of fact, their holding is valued at US$39m. That's a lot of money, and no small incentive to work hard. Despite being just 0.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to nVent Electric, with market caps over US$8.0b, is around US$13m.

nVent Electric offered total compensation worth US$7.9m to its CEO in the year to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add nVent Electric To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into nVent Electric's strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that nVent Electric has underlying strengths that make it worth a look at. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for nVent Electric (1 is potentially serious) you should be aware of.

Although nVent Electric 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.