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.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Royal Caribbean Cruises (NYSE:RCL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Royal Caribbean Cruises with the means to add long-term value to shareholders.

Royal Caribbean Cruises' Improving Profits

Over the last three years, Royal Caribbean Cruises 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. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, Royal Caribbean Cruises' EPS shot from US$3.60 to US$9.68, over the last year. It's a rarity to see 169% year-on-year growth like that.

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. Royal Caribbean Cruises shareholders can take confidence from the fact that EBIT margins are up from 18% to 25%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Royal Caribbean Cruises' future EPS 100% free.

Are Royal Caribbean Cruises Insiders Aligned With All Shareholders?

Owing to the size of Royal Caribbean Cruises, we wouldn't expect insiders to hold a significant proportion of the company. 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$222m. We note that this amounts to 0.4% of the company, which may be small owing to the sheer size of Royal Caribbean Cruises but it's still worth mentioning. This still shows shareholders there is a degree of alignment between management and themselves.

Is Royal Caribbean Cruises Worth Keeping An Eye On?

Royal Caribbean Cruises' earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Royal Caribbean Cruises for a spot on your watchlist. It is worth noting though that we have found 3 warning signs for Royal Caribbean Cruises (1 makes us a bit uncomfortable!) that you need to take into consideration.

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.