Yahoo Finance Here's Why We Think Infineon Technologies (ETR:IFX) Is Well Worth Watching
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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 Infineon Technologies (ETR:IFX). 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 Infineon Technologies
Infineon Technologies' Improving Profits
Over the last three years, Infineon Technologies 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. As a result, we'll zoom in on growth over the last year, instead. Infineon Technologies boosted its trailing twelve month EPS from €1.86 to €2.29, in the last year. That's a 23% gain; respectable growth in the broader scheme of things.
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. Infineon Technologies maintained stable EBIT margins over the last year, all while growing revenue 7.0% to €16b. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Infineon Technologies' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Infineon Technologies Insiders Aligned With All Shareholders?
It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. For companies with market capitalisations over €7.5b, like Infineon Technologies, the median CEO pay is around €5.2m.
The Infineon Technologies CEO received €3.0m in compensation for the year ending September 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.
Does Infineon Technologies Deserve A Spot On Your Watchlist?
One important encouraging feature of Infineon Technologies is that it is growing profits. Not only that, but the CEO is paid quite reasonably, which should prompt investors to feel more trusting of the board of directors. All things considered, Infineon Technologies is definitely worth taking a deeper dive into. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Infineon Technologies.
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 tailored list of German companies which have demonstrated growth backed by recent insider purchases.
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.
