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. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Arcadis (AMS:ARCAD), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Arcadis

How Fast Is Arcadis Growing Its Earnings Per Share?

Over the last three years, Arcadis has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, Arcadis' EPS catapulted from €1.27 to €2.25, over the last year. Year on year growth of 77% is certainly a sight to behold.

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. Arcadis maintained stable EBIT margins over the last year, all while growing revenue 8.1% to €5.0b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

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 Arcadis' future profits.

Are Arcadis Insiders Aligned With All Shareholders?

Since Arcadis has a market capitalisation of €5.0b, we wouldn't expect insiders to hold a large percentage of shares. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Indeed, they hold €29m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.6% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

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. Our analysis has discovered that the median total compensation for the CEOs of companies like Arcadis with market caps between €3.9b and €12b is about €2.3m.

The Arcadis CEO received €1.7m in compensation for the year ending December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Arcadis Worth Keeping An Eye On?

Arcadis' earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The strong EPS improvement suggests the businesses is humming along. Arcadis is certainly doing some things right and is well worth investigating. We should say that we've discovered 1 warning sign for Arcadis that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in NL with promising growth potential and insider confidence.

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.