Profit ratio

Here’s why I think EVN (VIE:EVN) might deserve your attention today

For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it completely lacks a track record of revenue and earnings. Unfortunately, high-risk investments are often unlikely to ever return, and many investors pay a price to learn their lesson.

If, on the other hand, you like businesses that generate revenue and even profit, then you might be interested in NVE (LIFE:EVN). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. While a well-funded business may suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to turn a profit, or else breathe its last breath.

See our latest analysis for EVN

EVN’s earnings per share increase.

As one of my mentors once told me, stock price follows earnings per share (EPS). This means EPS growth is seen as a real benefit by most successful long-term investors. We can see that over the past three years, EVN has grown its EPS by 16% per year. This growth rate is quite good, assuming the company can sustain it.

A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. While EVN has done well to grow revenues over the past year, EBIT margins have been held back at the same time. So if EBIT margins can stabilize, this top line growth should pay off for shareholders.

In the table below, you can see how the company has increased its profits and revenue over time. To see the actual numbers, click on the chart.

WBAG: EVN Earnings and Earnings History May 20, 2022

Luckily, we have access to EVN analyst forecasts future profits. You can make your own predictions without looking, or you can take a peek at what the pros are predicting.

Are EVN insiders aligned with all shareholders?

Generally, I think it’s worth considering how much the CEO gets paid, because unreasonably high rates could be considered against the interests of shareholders. For companies with a market capitalization between €1.9 billion and €6.0 billion, such as EVN, the median compensation for CEOs is around €1.9 million.

The CEO of EVN received total compensation of just €633,000 during the year at . This seems to me to be a modest remuneration, and can suggest a certain respect for the interests of the shareholders. CEO pay levels aren’t the most important metric for investors, but when pay is modest, it promotes better alignment between the CEO and ordinary shareholders. It can also be a sign of a culture of integrity, broadly defined.

Does EVN deserve a spot on your watch list?

An important and encouraging feature of EVN is that it increases its profits. Not only that, but the CEO is paid quite reasonably, which makes me feel more confident in the board. So I think the title deserves further research, if not an instant addition to your watchlist. Of course, just because EVN is growing doesn’t mean it’s undervalued. If you’re wondering about valuation, check out this gauge of its price-to-earnings ratio, relative to its industry.

While EVN certainly looks good to me, I’d like it more if insiders were buying stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying might be exactly what you’re looking for.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.