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Here’s why Sempra (NYSE: SRE) has caught investors’ attention

The excitement of investing in a company that can turn around its fortunes is a major attraction for some speculators, so even companies that have no revenues, no profits and a history of failure can successfully find investors. Sometimes these stories can cloud investors’ minds, leading them to invest with their emotions rather than based on the company’s sound fundamentals. A loss-making company has not yet proven itself in terms of profits and, eventually, the inflow of external capital may dry up.

Despite being in the age of open-air investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like Sempra (NYSE:SRE). This is not to say that the business presents the best investment opportunity, but profitability is a key element of business success.

See our latest analysis for Sempra

How fast is Sempra growing its earnings per share?

The market is a voting machine in the short term, but a weighing machine in the long term, so we can expect the stock price to eventually follow earnings per share (EPS) results. This makes EPS growth an attractive quality for any business. We can see that over the last three years, Sempra has grown its EPS by 13% per year. This is a good growth rate, if it can be sustained.

Revenue growth is a great indicator of the sustainability of growth and, combined with a high earnings before interest and tax (EBIT) margin, it is a great way for a company to maintain a competitive edge in the market . The music to the ears of Sempra shareholders is that EBIT margins have increased from 17% to 22% over the past 12 months and revenue is also on an upward trend. Checking both of these boxes is, in our opinion, a good sign of growth.

The chart below shows how the company’s financial and top-line results have changed over time. To see the actual numbers, click on the chart.

income-and-income-history
NYSE: SRE Earnings and Revenue History as of May 7, 2024

Of course, the trick is to find stocks that have their best days in the future, not the past. You can of course base your opinion on past performance, but you can also check out this interactive graph of professional analyst EPS forecasts for Sempra.

Are Sempra insiders aligned with all shareholders?

Due to Sempra’s size, we don’t expect insiders to own a significant stake in the company. But thanks to their investment in the company, it’s nice to see that there are still incentives to align their actions with those of shareholders. In fact, they hold $16 million of his shares. This shows significant buy-in and can indicate belief in the business strategy. Even though that’s only about 0.04% of the company, it’s enough money to indicate alignment between the company’s leadership and common shareholders.

Should you add Sempra to your watchlist?

As previously mentioned, Sempra is a growing company, which is encouraging. To add an extra spark to the fire, significant insider ownership in the company is another strong point. Both of these factors constitute a major strength for the company, which should be a strong contender on your watch lists. We don’t want to rain on the parade too much, but we also found 2 warning signs for Sempra which you need to be aware of.

While opting for stocks without earnings growth and insider buying can yield results, for investors who value these key metrics, here is a carefully selected list of companies in the United States with promising growth potential and a privileged trust.

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

The assessment is complex, but we help to simplify it.

Find out if Sempra is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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