New Zealand markets closed
  • NZX 50

    11,596.03
    -21.11 (-0.18%)
     
  • NZD/USD

    0.6418
    +0.0038 (+0.60%)
     
  • NZD/EUR

    0.6084
    +0.0049 (+0.81%)
     
  • ALL ORDS

    7,406.30
    +36.90 (+0.50%)
     
  • ASX 200

    7,213.20
    +37.70 (+0.53%)
     
  • OIL

    72.45
    +0.99 (+1.39%)
     
  • GOLD

    1,809.60
    +8.10 (+0.45%)
     
  • NASDAQ

    11,669.74
    +32.24 (+0.28%)
     
  • FTSE

    7,479.03
    +6.86 (+0.09%)
     
  • Dow Jones

    33,755.18
    -26.30 (-0.08%)
     
  • DAX

    14,367.42
    +102.86 (+0.72%)
     
  • Hang Seng

    19,900.87
    +450.64 (+2.32%)
     
  • NIKKEI 225

    27,901.01
    +326.58 (+1.18%)
     
  • NZD/JPY

    87.5560
    +0.4570 (+0.52%)
     

With EPS Growth And More, Abbott Laboratories (NYSE:ABT) Makes An Interesting Case

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. 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.

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 Abbott Laboratories (NYSE:ABT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Abbott Laboratories

How Quickly Is Abbott 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. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Abbott Laboratories has grown EPS by 44% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Abbott Laboratories is growing revenues, and EBIT margins improved by 2.7 percentage points to 23%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

earnings-and-revenue-history
earnings-and-revenue-history

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Abbott Laboratories?

Are Abbott Laboratories Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$179b company like Abbott Laboratories. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$1.3b. While that is a lot of skin in the game, we note this holding only totals to 0.7% of the business, which is a result of the company being so large. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Is Abbott Laboratories Worth Keeping An Eye On?

Abbott Laboratories' earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Abbott Laboratories very closely. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Abbott Laboratories that you should be aware of.

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 free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here