The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Cincinnati Financial (NASDAQ:CINF). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Cincinnati Financial with the means to add long-term value to shareholders.

View our latest analysis for Cincinnati Financial

Cincinnati Financial's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Cincinnati Financial has grown EPS by 7.8% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. It's noted that Cincinnati Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. The music to the ears of Cincinnati Financial shareholders is that EBIT margins have grown from 22% to 32% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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 Cincinnati Financial?

Are Cincinnati Financial Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's good to see Cincinnati Financial insiders walking the walk, by spending US$641k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. We also note that it was the Independent Director, David Osborn, who made the biggest single acquisition, paying US$223k for shares at about US$112 each.

Along with the insider buying, another encouraging sign for Cincinnati Financial is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth US$384m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Cincinnati Financial's CEO, Steve Spray, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Cincinnati Financial, with market caps over US$8.0b, is around US$13m.

Cincinnati Financial's CEO took home a total compensation package of US$4.7m in the year prior to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is Cincinnati Financial Worth Keeping An Eye On?

One important encouraging feature of Cincinnati Financial is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Before you take the next step you should know about the 1 warning sign for Cincinnati Financial that we have uncovered.

The good news is that Cincinnati Financial is not the only stock with insider buying. Here's a list of small cap, undervalued companies in the US with insider buying in the last three months!

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.