Many investors, especially inexperienced ones, often buy stocks in companies with a good history, even when those companies are losing money. But the reality is that if a company loses money every year for long enough, its investors usually bear their share of those losses. A loss-making company has yet to prove itself with profits, and at some point the inflow of outside capital may dry up.
Although we are in the era of high-sky investing in technology stocks, many investors still follow a more traditional strategy. They buy shares of profitable companies such as Zoetis (NYSE:ZTS). Even if this company is fairly valued by the market, investors would agree that Zoetis still has the opportunity to increase value for shareholders over the long term by generating consistent earnings.
Check out our latest analysis for Zoetis
How fast is Zoetis growing?
If you believe that markets are even remotely efficient, then over the long term you would expect a company’s share price to follow its earnings per share (EPS). Therefore, it makes sense for experienced investors to pay close attention to earnings per share when analyzing investments. We can see that Zoetis has grown its earnings per share at 8.8% per year over the past three years. That growth rate is pretty good, assuming the company can sustain it.
It’s often helpful to look at earnings before interest and taxes (EBIT) margins and revenue growth to get another sense of the quality of a company’s growth. Zoetis was able to maintain stable EBIT margins last year while increasing revenue by 8.4% to $8.9 billion. That’s progress.
In the graphic below you can see how the company has grown profit and revenue over time. Click on the image to see more detailed information.
The trick for an investor is to find companies that will be will continue to perform well in the future, not just in the past. While there are no crystal balls, you can see our visualization of analyst consensus forecasts for Zoetis’ future earnings per share 100% free.
Are Zoetis insiders on the same page as all shareholders?
Since Zoetis has a market capitalization of $83 billion, we wouldn’t expect insiders to own a large portion of the stock. But thanks to their investment in the company, it’s encouraging to see that there are still incentives to align their actions with shareholders. Holding $66 million worth of the company’s stock is no small feat, and insiders will be committed to achieving the best outcomes for shareholders. This would suggest that the goals of shareholders and management are one and the same.
Does Zoetis deserve a spot on your watchlist?
One key encouraging feature of Zoetis is that earnings are growing. If that alone isn’t enough, there are also the rather notable levels of insider ownership. This combination is definitely favored by investors, so you should keep the company on your watchlist. We don’t want to spoil the mood too much, but we also noticed 1 warning signal for Zoetis that you need to consider.
There is always the possibility of buying shares that are not increasing yields and not Insiders have been buying shares. But for those who consider these important metrics, we recommend looking at companies that Do have these features. You can access a customized list of companies whose growth is supported by significant insider ownership.
Please note that the insider transactions discussed in this article are reportable transactions in the respective jurisdiction.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
