For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it currently lacks a track record of revenue and earnings. Sometimes these stories can cloud investors’ minds, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always in a race against time to achieve financial viability, so investors in these companies may take on more risk than they should.
So if this idea of high risk and high reward doesn’t sit well with you, you might be more interested in profitable and growing businesses, like Capital One Financial (NYSE:COF). While profit isn’t the only metric to consider when investing, it’s worth recognizing companies that can consistently produce it.
See our latest analysis for Capital One Financial
Capital One Financial’s earnings per share increase
The market is a short-term voting machine, but a long-term weighing machine, so you would expect the stock price to eventually follow earnings per share (EPS) results. This makes EPS growth an attractive quality for any business. Shareholders will be pleased to learn that Capital One Financial’s EPS has grown 32% annually, compounded, over three years. Generally, we would say that if a company can follow this kind of growth, shareholders will be radiant.
It is often useful to look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another idea of the quality of the company’s growth. It should be noted that the income of Capital One Financial operations was lower than its turnover for the last twelve months, which could distort our analysis of its margins. While we note that Capital One Financial achieved similar EBIT margins to last year, revenue increased 31% to $32 billion. It is progress.
You can check the company’s revenue and profit growth trend in the table below. For more details, click on the image.
As we live in the moment, there is no doubt that the future matters most in the investment decision process. So why not check out this interactive chart outlining future EPS estimates, for Capital One Financial?
Are Capital One’s financial insiders aligned with all shareholders?
Due to the size of Capital One Financial, we would not expect insiders to own a significant share of the company. But we are reassured by the fact that they are investors in the company. We note that their impressive stake in the company is worth US$478 million. Investors will appreciate that management has so much skin in the game, as it shows their commitment to the future of the company.
Does Capital One Financial deserve a spot on your watch list?
For growth investors, Capital One Financial’s gross earnings growth rate is a beacon in the night. With EPS growth rates like this, it’s no surprise to see the company’s top brass trusting the company by continuing to hold a large investment. Rapid growth and confident insiders should be enough to warrant further research, so it would seem like a good stock to watch. It should be noted, however, that we found 4 warning signs for Capital One Financial (1 is significant!) that you need to consider.
While Capital One Financial certainly looks good, it could attract more investors if insiders buy shares. If you like seeing insiders buy, then this free list of growing companies that insiders are buying might be exactly what you are looking for.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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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.