Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily 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.
NASDAQ:ADBE). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.” data-reactid=”29″>So if you’re like me, you might be more interested in profitable, growing companies, like Adobe (NASDAQ:ADBE). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
View our latest analysis for Adobe ” data-reactid=”30″>View our latest analysis for Adobe
Adobe’s Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud Adobe’s stratospheric annual EPS growth of 38%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that Adobe is growing revenues, and EBIT margins improved by 2.8 percentage points to 31%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
The chart below shows how the company’s bottom and top lines have progressed over time. For finer detail, click on the image.
this interactive chart depicting future EPS estimates, for Adobe?” data-reactid=”51″>While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Adobe?
Are Adobe Insiders Aligned With All Shareholders?
Since Adobe has a market capitalization of US$213b, we wouldn’t expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$684m. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!
Should You Add Adobe To Your Watchlist?
2 warning signs for Adobe you should know about.” data-reactid=”55″>Adobe’s earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Adobe is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we’ve spotted 2 warning signs for Adobe you should know about.
a free list of them here.” data-reactid=”56″>Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
Get in touch with us directly. Alternatively, email [email protected].” data-reactid=”58″>This article by Simply Wall St is general in nature. 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.
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