The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 Laureate Education (NASDAQ:LAUR), 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.

Laureate Education's Improving Profits

Over the last three years, Laureate Education has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Laureate Education's EPS shot from US$0.63 to US$1.32, over the last year. Year on year growth of 109% is certainly a sight to behold.

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. Laureate Education maintained stable EBIT margins over the last year, all while growing revenue 14% to US$1.5b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Laureate Education.

Are Laureate Education Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Laureate Education followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at US$21m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.9%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Laureate Education with market caps between US$1.0b and US$3.2b is about US$5.6m.

Laureate Education's CEO took home a total compensation package worth US$4.5m in the year leading up to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Laureate Education To Your Watchlist?

Laureate Education's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The strong EPS improvement suggests the businesses is humming along. Laureate Education is certainly doing some things right and is well worth investigating. Even so, be aware that Laureate Education is showing 1 warning sign in our investment analysis , you should know about...

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.