Here's Why Chevron (NYSE:CVX) Has Caught The Eye Of Investors

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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 as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ 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 Chevron (NYSE:CVX), which has not only revenues, but also profits. While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if its growing.

Check out our latest analysis for Chevron

Chevron’s Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Chevron has managed to grow EPS by 24% per year over three years. If the company can sustain that sort of growth, we’d expect shareholders to come away satisfied.

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. The good news is that Chevron is growing revenues, and EBIT margins improved by 9.4 percentage points to 15%, over the last year. Both of which are great metrics to check off for potential growth.

The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Chevron’s forecast profits?

Are Chevron Insiders Aligned With All Shareholders?

Owing to the size of Chevron, we wouldn’t expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$153m. We note that this amounts to 0.05% of the company, which may be small owing to the sheer size of Chevron but it’s still worth mentioning. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Should You Add Chevron To Your Watchlist?

For growth investors, Chevron’s raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it’s hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it’s worthwhile to investigate further with a view to discern the stock’s true value. It’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 2 warning signs with Chevron (at least 1 which is a bit unpleasant) , and understanding these should be part of your investment process.

There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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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