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If EPS Growth Is Important To You, Centene (NYSE:CNC) Presents An Opportunity

·4 min read

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Centene (NYSE:CNC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Centene

How Fast Is Centene Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Outstandingly, Centene's EPS shot from US$1.24 to US$3.21, over the last year. It's a rarity to see 159% year-on-year growth like that.

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. It's noted that Centene's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Centene maintained stable EBIT margins over the last year, all while growing revenue 13% to US$130b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
earnings-and-revenue-history

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Centene's forecast profits?

Are Centene Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news is that Centene insiders spent a whopping US$1.7m on stock in just one year, without so much as a single sale. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. It is also worth noting that it was Independent Director Christopher Coughlin who made the biggest single purchase, worth US$976k, paying US$81.37 per share.

On top of the insider buying, it's good to see that Centene insiders have a valuable investment in the business. We note that their impressive stake in the company is worth US$323m. We note that this amounts to 0.6% of the company, which may be small owing to the sheer size of Centene but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Does Centene Deserve A Spot On Your Watchlist?

Centene's earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Centene deserves timely attention. What about risks? Every company has them, and we've spotted 1 warning sign for Centene you should know about.

Keen growth investors love to see insider buying. Thankfully, Centene isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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