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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Constellation Energy (NASDAQ:CEG). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Constellation Energy's Improving Profits
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. In impressive fashion, Constellation Energy's EPS grew from US$5.02 to US$11.97, over the previous 12 months. It's a rarity to see 138% year-on-year growth like that.
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. Unfortunately, Constellation Energy's revenue dropped 5.4% last year, but the silver lining is that EBIT margins improved from 6.9% to 18%. That's not a good look.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
Check out our latest analysis for Constellation Energy
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 Constellation Energy ?
Are Constellation Energy Insiders Aligned With All Shareholders?
Since Constellation Energy has a market capitalisation of US$68b, we wouldn't expect insiders to hold a large percentage of shares. 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$157m. While that is a lot of skin in the game, we note this holding only totals to 0.2% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.