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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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Exelon (NASDAQ:EXC), which has not only revenues, but also profits. 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.
View our latest analysis for Exelon
How Fast Is Exelon Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Exelon has managed to grow EPS by 17% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Exelon maintained stable EBIT margins over the last year, all while growing revenue 6.0% to US$23b. That's encouraging news for the company!
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.
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 Exelon?
Are Exelon Insiders Aligned With All Shareholders?
Owing to the size of Exelon, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. To be specific, they have US$22m worth of shares. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.05%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Is Exelon Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into Exelon's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Before you take the next step you should know about the 2 warning signs for Exelon (1 is concerning!) that we have uncovered.