With EPS Growth And More, Sartorius Stedim Biotech (EPA:DIM) Is Interesting
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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 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Sartorius Stedim Biotech (EPA:DIM). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for Sartorius Stedim Biotech
How Quickly Is Sartorius Stedim Biotech Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Sartorius Stedim Biotech has grown EPS by 18% per year, compound, in the last three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Sartorius Stedim Biotech's EBIT margins were flat over the last year, revenue grew by a solid 17% to €1.3b. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
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 Sartorius Stedim Biotech?
Are Sartorius Stedim Biotech Insiders Aligned With All Shareholders?
As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. I discovered that the median total compensation for the CEOs of companies like Sartorius Stedim Biotech, with market caps over €7.1b, is about €3.1m.
The Sartorius Stedim Biotech CEO received €2.5m in compensation for the year ending December 2018. That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.
Is Sartorius Stedim Biotech Worth Keeping An Eye On?
For growth investors like me, Sartorius Stedim Biotech's raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, it probably has its best days ahead, and the modest CEO pay suggests the company is careful with cash. So I'd argue this is the kind of stock worth watching, even if it isn't great value today. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Sartorius Stedim Biotech shapes up to industry peers, when it comes to ROE.
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