I Ran A Stock Scan For Earnings Growth And Quidel (NASDAQ:QDEL) Passed With Ease

It’s only natural that many investors, especially those who are new to the game, prefer to buy shares in ‘sexy’ stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, ‘If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.’ When they buy such story stocks, investors are all too often the patsy.

NASDAQ:QDEL). While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.” data-reactid=”29″>If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Quidel (NASDAQ:QDEL). While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Quidel ” data-reactid=”30″> View our latest analysis for Quidel

Quidel’s Improving Profits

Over the last three years, Quidel has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don’t think the percent growth rate is particularly meaningful. As a result, I’ll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Quidel’s EPS shot from US$1.75 to US$3.69, over the last year. Year on year growth of 111% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Quidel is growing revenues, and EBIT margins improved by 12.6 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.

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check this interactive graph of professional analyst EPS forecasts for Quidel.” data-reactid=”51″>Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Quidel.

Are Quidel Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$7.9b company like Quidel. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$735m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$4.0b and US$12b, like Quidel, the median CEO pay is around US$7.4m.

The Quidel CEO received US$4.2m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.