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With EPS Growth And More, London Stock Exchange Group (LON:LSEG) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 London Stock Exchange Group (LON:LSEG). 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.

See our latest analysis for London Stock Exchange Group

How Quickly Is London Stock Exchange Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years London Stock Exchange Group grew its EPS by 6.1% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It's noted that London Stock Exchange Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note London Stock Exchange Group achieved similar EBIT margins to last year, revenue grew by a solid 15% to UK£7.7b. 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.

earnings-and-revenue-history
earnings-and-revenue-history

Fortunately, we've got access to analyst forecasts of London Stock Exchange Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are London Stock Exchange Group 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the UK£50k that Independent Non-Executive Director Dominic Blakemore spent buying shares (at an average price of about UK£73.18). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Should You Add London Stock Exchange Group To Your Watchlist?

One important encouraging feature of London Stock Exchange Group is that it is growing profits. It's not easy for business to grow EPS, but London Stock Exchange Group has shown the strengths to do just that. The icing on the cake is that an insider bought shares during the year; a point of interest for people who will want to keep a watchful eye on this stock. Of course, profit growth is one thing but it's even better if London Stock Exchange Group is receiving high returns on equity, since that should imply it can keep growing without much need for capital. Click on this link to see how it is faring against the average in its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of London Stock Exchange Group, you'll probably love this free list of growing companies that insiders are buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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