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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.
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 Simpson Manufacturing (NYSE:SSD). 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 Simpson Manufacturing
Simpson Manufacturing’s Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by the most successful long-term investors. To the delight of shareholders, Simpson Manufacturing has achieved impressive annual EPS growth of 39%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. Simpson Manufacturing shareholders can take confidence from the fact that EBIT margins are up from 20% to 25%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
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 Simpson Manufacturing’s future profit.
Are Simpson Manufacturing Insiders Aligned With All Shareholders?
It’s a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Simpson manufacturing followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at US$20m. This considerable investment should help drive long-term value in the business. Even though that’s only about 0.5% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders.
It’s good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you’d argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Simpson Manufacturing with market caps between US$2.0b and US$6.4b is about US$6.9m.
Simpson Manufacturing’s CEO took home a total compensation package worth US$3.9m in the year leading up to December 2021. That is actually below the median for CEO’s of similarly sized companies. While the level of CEO compensation shouldn’t be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Simpson Manufacturing To Your Watchlist?
Simpson Manufacturing’s earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Simpson Manufacturing certainly ticks a few boxes, so we think it’s probably well worth further consideration. However, before you get too excited we’ve discovered 2 warning signs for Simpson Manufacturing (1 is significant!) that you should be aware of.
There’s always the possibility of doing well buying stocks that are not 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 free list of them here.
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.