Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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 PayPal Holdings (NASDAQ:PYPL), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for PayPal Holdings

PayPal Holdings' Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. To the delight of shareholders, PayPal Holdings' EPS soared from US$3.37 to US$4.42, over the last year. That's a fantastic gain of 31%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note PayPal Holdings achieved similar EBIT margins to last year, revenue grew by a solid 8.0% to US$31b. That's a real positive.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for PayPal Holdings' future EPS 100% free.

Are PayPal Holdings Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$77b company like PayPal Holdings. 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$142m. While that is a lot of skin in the game, we note this holding only totals to 0.2% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.

Should You Add PayPal Holdings To Your Watchlist?

You can't deny that PayPal Holdings has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. 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. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if PayPal Holdings is trading on a high P/E or a low P/E, relative to its industry.