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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Eli Lilly (NYSE:LLY). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Eli Lilly
How Quickly Is Eli Lilly Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Eli Lilly has grown EPS by 12% per year. That's a good rate of growth, if it can be sustained.
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. Eli Lilly shareholders can take confidence from the fact that EBIT margins are up from 31% to 36%, and revenue is growing. Both of which are great metrics to check off for potential growth.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Eli Lilly's forecast profits?
Are Eli Lilly Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$679b company like Eli Lilly. 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$863m. We note that this amounts to 0.1% of the company, which may be small owing to the sheer size of Eli Lilly 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.
Is Eli Lilly Worth Keeping An Eye On?
As previously touched on, Eli Lilly is a growing business, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. We don't want to rain on the parade too much, but we did also find 2 warning signs for Eli Lilly that you need to be mindful of.