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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 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 CSX (NASDAQ:CSX), 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.
See our latest analysis for CSX
CSX's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that CSX's EPS has grown 18% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. CSX maintained stable EBIT margins over the last year, all while growing revenue 7.8% to US$15b. That's progress.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for CSX's future EPS 100% free.
Are CSX Insiders Aligned With All Shareholders?
Owing to the size of CSX, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Notably, they have an enviable stake in the company, worth US$175m. We note that this amounts to 0.3% of the company, which may be small owing to the sheer size of CSX but it's still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like CSX, with market caps over US$8.0b, is about US$12m.