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If You Like EPS Growth Then Check Out Integrated Research (ASX:IRI) Before It's Too Late

Simply Wall St
·4 mins read

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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Integrated Research (ASX:IRI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Integrated Research

How Quickly Is Integrated Research Increasing Earnings Per Share?

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. Over the last three years, Integrated Research has grown EPS by 8.8% per year. That's a pretty good rate, if the company can sustain it.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Integrated Research shareholders can take confidence from the fact that EBIT margins are up from 27% to 30%, and revenue is growing. 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. To see the actual numbers, click on the chart.

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

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Integrated Research's balance sheet strength, before getting too excited.

Are Integrated Research Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Integrated Research insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth AU$221m. That equates to 34% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Integrated Research with market caps between AU$279m and AU$1.1b is about AU$980k.

The Integrated Research CEO received AU$865k in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Integrated Research Worth Keeping An Eye On?

One positive for Integrated Research is that it is growing EPS. That's nice to see. Earnings growth might be the main game for Integrated Research, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Integrated Research (1 is potentially serious) you should be aware of.

Although Integrated Research certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

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.

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