With EPS Growth And More, U.S. Physical Therapy (NYSE:USPH) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like U.S. Physical Therapy (NYSE:USPH). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for U.S. Physical Therapy

U.S. Physical Therapy's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years U.S. Physical Therapy grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that U.S. Physical Therapy's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Unfortunately, revenue is down and so are margins. That will not make it easy to grow profits, to say the least.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

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

Are U.S. Physical Therapy Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that U.S. Physical Therapy insiders have a significant amount of capital invested in the stock. Indeed, they hold US$25m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 2.1% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add U.S. Physical Therapy To Your Watchlist?

One important encouraging feature of U.S. Physical Therapy is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. It is worth noting though that we have found 1 warning sign for U.S. Physical Therapy that you need to take into consideration.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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.

This article by Simply Wall St is general in nature. 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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