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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Costco Wholesale (NASDAQ:COST). 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 Costco Wholesale

How Quickly Is Costco Wholesale 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. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Costco Wholesale grew its EPS by 13% 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. Costco Wholesale maintained stable EBIT margins over the last year, all while growing revenue 5.4% to US$259b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Costco Wholesale's forecast profits?

Are Costco Wholesale Insiders Aligned With All Shareholders?

Owing to the size of Costco Wholesale, 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. Notably, they have an enviable stake in the company, worth US$726m. We note that this amounts to 0.2% of the company, which may be small owing to the sheer size of Costco Wholesale 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.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to Costco Wholesale, with market caps over US$8.0b, is around US$13m.

The Costco Wholesale CEO received total compensation of just US$2.7m in the year to September 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Costco Wholesale To Your Watchlist?

One positive for Costco Wholesale is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for Costco Wholesale, but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Before you take the next step you should know about the 1 warning sign for Costco Wholesale that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.