Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Ituran Location and Control (NASDAQ:ITRN). 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.
How Fast Is Ituran Location and Control Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Ituran Location and Control has managed to grow EPS by 18% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Ituran Location and Control maintained stable EBIT margins over the last year, all while growing revenue 3.7% to US$338m. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
View our latest analysis for Ituran Location and Control
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 Ituran Location and Control's balance sheet strength, before getting too excited.
Are Ituran Location and Control Insiders Aligned With All Shareholders?
Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. The median total compensation for CEOs of companies similar in size to Ituran Location and Control, with market caps between US$400m and US$1.6b, is around US$3.7m.
Ituran Location and Control's CEO took home a total compensation package worth US$1.9m in the year leading up to December 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Does Ituran Location and Control Deserve A Spot On Your Watchlist?
For growth investors, Ituran Location and Control's raw rate of earnings growth is a beacon in the night. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. So this stock is well worth an addition to your watchlist as it has the potential to provide great value to shareholders. Still, you should learn about the 1 warning sign we've spotted with Ituran Location and Control.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.
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.