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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 Ligand Pharmaceuticals (NASDAQ:LGND). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
View our latest analysis for Ligand Pharmaceuticals
Ligand Pharmaceuticals' Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that Ligand Pharmaceuticals has grown EPS by 54% 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.
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. To cut to the chase Ligand Pharmaceuticals' EBIT margins dropped last year, and so did its revenue. This is less than stellar for the company.
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.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Ligand Pharmaceuticals' future profits.
Are Ligand Pharmaceuticals Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Ligand Pharmaceuticals followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Holding US$68m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.
Should You Add Ligand Pharmaceuticals To Your Watchlist?
Ligand Pharmaceuticals' earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Ligand Pharmaceuticals for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 4 warning signs for Ligand Pharmaceuticals (1 is a bit concerning!) that you need to be mindful of.