We performed stock analysis for earnings growth and IMCD (AMS:IMCD) passed with ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies with no revenue, no profit and a history of failure can successfully find investors. But the reality is that when a company loses money every year, for long enough, its investors will usually take their share of those losses. Although a well-funded business may suffer losses for years, it will eventually have to turn a profit or investors will move on and the business will wither away.

Despite being in the age of astronomical investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like IMCD (AMS: IMCD). While that doesn’t necessarily mean it’s undervalued, the company’s profitability is enough to warrant some appreciation, especially if it’s growing.

See our latest analysis for IMCD

How fast is IMCD growing?

If a company can keep increasing its earnings per share (EPS) long enough, its stock price should eventually follow. This means EPS growth is seen as a real benefit by most successful long-term investors. Impressively, IMCD has grown EPS by 32% pa, compounded, over the past three years. If the company can sustain this type of growth, we expect shareholders to come away satisfied.

Revenue growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and tax (EBIT) margin, it’s a great way for a business to maintain a competitive edge in the market. IMCD has maintained stable EBIT margins over the past year, while increasing its turnover by 34% to 4.1 billion euros. This is encouraging news for the company!

You can check the company’s revenue and profit growth trend in the table below. To see the actual numbers, click on the chart.

ENXTAM: IMCD Earnings and Revenue History October 7, 2022

The trick, as an investor, is to find companies that go to perform well in the future, not just in the past. While crystal balls don’t exist, you can check out our visualization of consensus analyst forecasts for IMCD’s future EPS 100% free.

Are IMCD insiders aligned with all shareholders?

Given that IMCD has a market capitalization of 7.4 billion euros, we do not expect insiders to hold a high percentage of shares. But we are reassured by the fact that they are investors in the company. In particular, they hold an enviable stake in the company, worth 126 million euros. Investors will appreciate that management has so much skin in the game, as it shows their commitment to the future of the company.

It’s good to see that insiders are invested in the company, but are the compensation levels reasonable? Well, based on CEO compensation, you’d say they indeed are. For companies with a market capitalization between €4.1 billion and €12 billion, such as IMCD, the median compensation for CEOs is around €3.0 million.

The CEO of IMCD received €2.1 million in compensation for the year ending December 2021. This is actually lower than the median for CEOs of similarly sized companies. CEO pay levels aren’t the most important metric for investors, but when the salary is modest, it promotes better alignment between the CEO and ordinary shareholders. It can also be a sign of a culture of integrity, broadly defined.

Should you add IMCD to your watchlist?

You cannot deny that IMCD has been growing its earnings per share at a very impressive rate. It’s attractive. If you’re still in doubt, also remember that company insiders have a huge investment that aligns with shareholders, and CEO compensation is quite modest compared to companies of a similar size. This may just be a quick overview, but the bottom line is that IMCD is worth watching. It should be noted, however, that we found 1 warning sign for IMCD that you need to consider.

There is always the possibility of doing well by buying stocks that are not increased income and not have insiders buying stocks. But for those who consider these measures important, we encourage you to check out the companies that do have these characteristics. You can access a free list of them here.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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