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If You Like EPS Growth Then Check Out Vodafone Group (LON:VOD) Before It's Too Late

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 completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Vodafone Group (LON:VOD). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Vodafone Group

How Fast Is Vodafone Group Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Vodafone Group's EPS went from €0.0038 to €0.074 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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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. Vodafone Group shareholders can take confidence from the fact that EBIT margins are up from 7.8% to 12%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

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

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Vodafone Group's forecast profits?

Are Vodafone Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Despite -€35k worth of sales, Vodafone Group insiders have overwhelmingly been buying the stock, spending €251k on purchases in the last twelve months. On balance, to me, this signals their optimism. It is also worth noting that it was CFO & Director Margherita Della Valle who made the biggest single purchase, worth UK£129k, paying UK£1.19 per share.

Along with the insider buying, another encouraging sign for Vodafone Group is that insiders, as a group, have a considerable shareholding. Indeed, they hold €24m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.07% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Nick Read, is paid less than the median for similar sized companies. For companies with market capitalizations over €7.5b, like Vodafone Group, the median CEO pay is around €4.8m.

Vodafone Group offered total compensation worth €4.2m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Does Vodafone Group Deserve A Spot On Your Watchlist?

Vodafone Group's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Vodafone Group deserves timely attention. We should say that we've discovered 2 warning signs for Vodafone Group that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Vodafone Group, you'll probably love this free list of growing companies that insiders are buying.

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.