Investors are often guided by the idea of ​​discovering “the next big thing,” even if that means buying “story stocks” with no sales or even profits. But as Peter Lynch said One Up on Wall Street“Bad bets are almost never worth it.” Loss-making companies are constantly racing against time to become financially viable, so investors in these companies may be taking more risk than they should.

In contrast, many investors prefer to focus on companies like Corpay (NYSE:CPAY), which not only generates revenue but also profits. While that doesn't mean the company offers the best investment opportunity ever, profitability is a key component to business success.

Check out our latest analysis for Corpay

How fast is Corpay growing?

If a company manages to grow earnings per share (EPS) for long enough, its share price should eventually follow. Therefore, it makes sense for experienced investors to pay close attention to the company's earnings per share when conducting investment research. Over the last three years, Corpay has grown profits by 16% per year. That's a good growth rate if it's sustainable.

Careful consideration of revenue growth and EBIT (earnings before interest and taxes) margins can help provide an assessment of the sustainability of recent profit growth. Corpay's EBIT margins were largely flat last year, but the company should be pleased to report revenue growth of 5.3% to $3.8 billion for the period. That's really positive.

You can take a look at the company's revenue and profit growth trend in the chart below. Click on the table to see the exact numbers.

Since you don't look at the rearview mirror while driving, this might be of more interest to you free Analyst forecast report for Corpay's Future Profits.

Are Corpay insiders aligned with all shareholders?

Given Corpay's size, we wouldn't expect insiders to own a significant stake in the company. But thanks to their investment in the company, it's good to see that there are still incentives to align their actions with shareholders. In fact, they have a sizable net worth, currently estimated at $756 million. Investors will appreciate that management has so much influence as it shows their commitment to the company's future.

It means a lot when insiders invest in the company, but shareholders may question whether the compensation policy is in their best interests. Our quick analysis of CEO compensation seems to suggest this is the case. Our analysis found that the average total compensation of CEOs at companies like Corpay with market capitalizations above $8.0 billion is about $13 million.

The story continues

Corpay's CEO received total compensation of just $2.7 million in the year ended December 2023. This is well below average, so at first glance this agreement appears generous for shareholders and indicates a modest compensation culture. While the level of CEO compensation should not be the most important factor in how the company is perceived, modest compensation is positive because it suggests that the board has shareholders' interests in mind. In a broader sense, it can also be a sign of a culture of integrity.

Should you add Corpay to your watchlist?

The rising EPS is positive for Corpay. That's nice to see. The fact that earnings per share are growing is a real positive for Corpay, but the encouraging picture gets even better. Given both modest CEO compensation and significant insider ownership, one would think this company is at least watchlist worthy. Before you take the next step, you should be clear about this 2 warning signs for Corpay that we uncovered.

There is always the possibility that stocks are worth buying are not growing yields and not Let insiders buy shares. But for those who consider these important metrics, we recommend you look at companies that do Do have these functions. You can access a tailored list of companies that have demonstrated growth, supported by significant insider ownership.

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

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any stocks mentioned.