The excitement of investing in a company that can turn its fortunes around is a big draw for some speculators, so even companies that have no revenue, no profit, and a long track record can find investors. Unfortunately, the likelihood of these high-risk investments ever paying off is often very low, and many investors have to pay a high price to learn their lesson. Loss-making companies can act like a sponge, soaking up capital – so investors should be careful not to throw good money after bad.
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 Restaurants Darden (NYSE:DRI). While this doesn’t necessarily mean the company is undervalued, the company’s profitability is enough to justify some appreciation – especially if it’s growing.
Check out our latest analysis for Darden Restaurants
How quickly does Darden Restaurants grow earnings per share?
If a company can grow its earnings per share (EPS) long enough, its share price should eventually follow. This means that EPS growth is viewed as a real positive by most successful long-term investors. It’s certainly nice to see that Darden Restaurants has managed to grow earnings per share by 24% per year over three years. As a general rule, we would say that if a company can keep up The Kind of growth, shareholders will be beaming.
A careful look at revenue growth and earnings before interest and taxes (EBIT) margins can help assess the sustainability of recent earnings growth. Darden Restaurants was able to maintain stable EBIT margins last year while increasing revenue by 8.6% to $11 billion. That’s progress.
The chart below shows how the company’s profit and revenue have changed over time. Click on the chart to see the exact numbers.
In investing, as in life, the future is more important than the past. So check out free interactive visualization of Darden Restaurants’ forecast Profits?
Are Darden Restaurants insiders on the same page as all shareholders?
Given the size of Darden Restaurants, we wouldn’t expect insiders to own a significant portion of the company. 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 $88 million worth of the company’s stock is no small feat, and insiders will be committed to getting the best outcomes for shareholders. This should keep them focused on creating long-term value for shareholders.
Is it worth keeping an eye on the restaurants in Darden?
If you believe that share price follows earnings per share, then you should definitely take a closer look at Darden Restaurants’ strong EPS growth. Moreover, the high level of insider ownership is impressive and suggests that management values EPS growth and has confidence in Darden Restaurants’ continued strength. Fast growth and confident insiders should be enough to warrant further research, so it seems like a good stock to keep an eye on. What about risks? Every company has them, and we’ve found 3 warning signs for Darden Restaurants You should know about this.
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.
