If EPS Growth Is Important To You, Centene (NYSE:CNC) Presents An Opportunity

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Centene (NYSE:CNC), 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 Centene with the means to add long-term value to shareholders.

Check out our latest analysis for Centene

How Fast Is Centene Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Centene has grown EPS by 16% per year. That growth rate is fairly good, assuming the company can keep it up.

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. It's noted that Centene's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Centene achieved similar EBIT margins to last year, revenue grew by a solid 7.0% to US$138b. That's encouraging news for the company!

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 Centene's future EPS 100% free.

Are Centene Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's pleasing to note that insiders spent US$3.4m buying Centene shares, over the last year, without reporting any share sales whatsoever. Knowing this, Centene will have have all eyes on them in anticipation for the what could happen in the near future. We also note that it was the CEO & Director, Sarah London, who made the biggest single acquisition, paying US$1.9m for shares at about US$62.60 each.

On top of the insider buying, it's good to see that Centene insiders have a valuable investment in the business. We note that their impressive stake in the company is worth US$295m. This comes in at 0.8% of shares in the company, which is a fair amount of a business of this size. This still shows shareholders there is a degree of alignment between management and themselves.

Is Centene Worth Keeping An Eye On?

As previously touched on, Centene is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Of course, just because Centene is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Keen growth investors love to see insider buying. Thankfully, Centene isn't the only one. You can see a a free list of them here.

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.