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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in IDEXX Laboratories (NASDAQ:IDXX). 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 Quickly Is IDEXX Laboratories Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. IDEXX Laboratories managed to grow EPS by 6.4% 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.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. IDEXX Laboratories maintained stable EBIT margins over the last year, all while growing revenue 7.7% to US$3.8b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of IDEXX Laboratories' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are IDEXX Laboratories Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$40b company like IDEXX Laboratories. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$389m. We note that this amounts to 1.0% of the company, which may be small owing to the sheer size of IDEXX Laboratories but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.

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. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like IDEXX Laboratories, with market caps over US$8.0b, is about US$13m.

IDEXX Laboratories offered total compensation worth US$12m to its CEO in the year to December 2023. 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 IDEXX Laboratories Deserve A Spot On Your Watchlist?

One important encouraging feature of IDEXX Laboratories is that it is growing profits. The fact that EPS is growing is a genuine positive for IDEXX Laboratories, but the pleasant picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of IDEXX Laboratories.

Although IDEXX Laboratories certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.