Some have more money than sense, they say, so even companies with no revenue, no profit and a history of failures can easily find investors. But as Peter Lynch said in One Up on Wall Street“Long shots almost never pay off.”

If, on the other hand, you like businesses that generate revenue and even profit, then you might be interested in Keysight-Technologies (NYSE: KEYS). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when pressed.

Check out our latest analysis for Keysight Technologies

Improving Keysight Technologies Profits

Over the past three years, Keysight Technologies’ earnings per share have taken off like a rocket; fast and from a low base. So the actual growth rate doesn’t tell us much. Accordingly, I will instead zoom in on growth over the past year. Like a wedge-tailed eagle in the wind, Keysight Technologies’ EPS rose from US$3.41 to US$5.23 in just one year. That’s an impressive 53% gain.

I like to see revenue growth as an indication that growth is sustainable, and I look for a high margin on earnings before interest and taxes (EBIT) to point to a competitive moat (although some low-margin companies also have moats). Keysight Technologies shareholders can take comfort in the fact that EBIT margins have increased from 19% to 23% and revenues are increasing. Checking those two boxes is a good sign of growth, in my book.

In the table below, you can see how the company has increased its profits and revenue over time. For more details, click on the image.

As we live in the moment at all times, there is no doubt in my mind that the future matters more than the past. So why not check out this interactive chart outlining future EPS estimates, for Keysight Technologies?

Are Keysight Technologies insiders aligned with all shareholders?

Given that Keysight Technologies has a market capitalization of US$25 billion, we wouldn’t expect insiders to hold a high percentage of shares. But we are reassured by the fact that they are investors in the company. Since insiders own a small fortune of stock, currently valued at US$95 million, they have plenty of motivation to push the company to success. This should keep them focused on creating long-term shareholder value.

It means a lot to see insiders invested in the company, but I wonder if the compensation policies are shareholder-friendly. Well, based on the CEO’s salary, I’d say they are indeed. For companies with a market capitalization greater than $8.0 billion, such as Keysight Technologies, the median CEO salary is around $13 million.

The CEO of Keysight Technologies only received $6.0 million in total compensation for the year ending. This seems to me to be a modest remuneration, and can suggest a certain respect for the interests of the shareholders. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives me a bit more confidence that executives are looking out for shareholders’ interests. It can also be a sign of a culture of integrity, broadly defined.

Should you add Keysight Technologies to your watchlist?

Since I think share price tracks earnings per share, you can easily imagine how I feel about Keysight Technologies’ strong EPS growth. If you need more conviction beyond that EPS growth rate, don’t forget reasonable compensation and high insider participation. This may just be a quick overview, but the bottom line for me is that Keysight Technologies is worth watching. However, you should inquire about the 2 warning signs we spotted with Keysight Technologies.

Although Keysight Technologies looks good to me, I would rather have insiders buying stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying might be exactly what you are looking for.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

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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 be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.