If EPS Growth Is Important To You, Xcel Energy (NASDAQ:XEL) Presents An Opportunity

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Xcel Energy (NASDAQ:XEL), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Xcel Energy

How Fast Is Xcel Energy Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Xcel Energy managed to grow EPS by 4.3% per year, over three years. While that sort of growth rate isn’t anything to write home about, it does show the business is growing.

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. We note that while EBIT margins have improved from 16% to 20%, the company has actually reported a fall in revenue by 9.6%. That’s not a good look.

You can take a look at the company’s revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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

Are Xcel Energy Insiders Aligned With All Shareholders?

Since Xcel Energy has a market capitalisation of US$33b, we wouldn’t expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. To be specific, they have US$19m worth of shares. That’s a lot of money, and no small incentive to work hard. Even though that’s only about 0.06% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Xcel Energy Deserve A Spot On Your Watchlist?

One important encouraging feature of Xcel Energy is that it is growing profits. If that’s not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. We don’t want to rain on the parade too much, but we did also find 2 warning signs for Xcel Energy (1 can’t be ignored!) that you need to be mindful of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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

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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.