Does Jazz Pharmaceuticals (NASDAQ:JAZZ) Deserve A Spot On Your Watchlist?

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Jazz Pharmaceuticals (NASDAQ:JAZZ). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Jazz Pharmaceuticals with the means to add long-term value to shareholders.

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Jazz Pharmaceuticals' Improving Profits

In the last three years Jazz Pharmaceuticals' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Jazz Pharmaceuticals' EPS shot up from US$6.55 to US$9.22; a result that's bound to keep shareholders happy. That's a fantastic gain of 41%.

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. EBIT margins for Jazz Pharmaceuticals remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.1% to US$4.1b. That's progress.

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.

See our latest analysis for Jazz Pharmaceuticals

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Jazz Pharmaceuticals' future profits.

Are Jazz Pharmaceuticals Insiders Aligned With All Shareholders?

Since Jazz Pharmaceuticals has a market capitalisation of US$6.7b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$196m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Does Jazz Pharmaceuticals Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Jazz Pharmaceuticals' strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Jazz Pharmaceuticals' continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. We should say that we've discovered 3 warning signs for Jazz Pharmaceuticals that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.