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 as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’ 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.
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 JD Sports Fashion (LON:JD.). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.
The market is a voting machine in the short term, but a weighing machine in the long term, so you’d expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that JD Sports Fashion has managed to grow EPS by 17% per year over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be beaming.
One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for JD Sports Fashion remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 15% to UK£12b. That’s encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
View our latest analysis for JD Sports Fashion
Fortunately, we’ve got access to analyst forecasts of JD Sports Fashion’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
It’s said that there’s no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that JD Sports Fashion insiders spent UK£130k on stock, over the last year; in contrast, we didn’t see any selling. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Chairman Andrew Higginson for UK£100k worth of shares, at about UK£0.96 per share.
It’s commendable to see that insiders have been buying shares in JD Sports Fashion, but there is more evidence of shareholder friendly management. To be specific, the CEO is paid modestly when compared to company peers of the same size. For companies with market capitalisations between UK£3.0b and UK£8.9b, like JD Sports Fashion, the median CEO pay is around UK£3.1m.
The JD Sports Fashion CEO received UK£2.0m in compensation for the year ending February 2025. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it’s reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
For growth investors, JD Sports Fashion’s raw rate of earnings growth is a beacon in the night. And that’s not the only positive either. We have both insider buying and reasonable and remuneration to consider. On balance the message seems to be that this stock is worth looking at, at least for a while. 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 JD Sports Fashion.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of JD Sports Fashion, you’ll probably love this curated collection of companies in GB that have an attractive valuation alongside insider buying in the last three months.
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.
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