It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 DT Midstream (NYSE:DTM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide DT Midstream with the means to add long-term value to shareholders.
How Fast Is DT Midstream Growing Its Earnings Per Share?
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. In previous twelve months, DT Midstream's EPS has risen from US$3.27 to US$3.44. That's a fair increase of 5.3%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. DT Midstream maintained stable EBIT margins over the last year, all while growing revenue 7.5% to US$877m. That's encouraging news for the company!
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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for DT Midstream.
Are DT Midstream Insiders Aligned With All Shareholders?
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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We haven't seen any insiders selling DT Midstream shares, in the last year. Add in the fact that Robert Skaggs, the Executive Chairman of the company, paid US$20k for shares at around US$48.90 each. It seems that at least one insider is prepared to show the market there is potential within DT Midstream.
It's reassuring that DT Midstream insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations between US$4.0b and US$12b, like DT Midstream, the median CEO pay is around US$8.4m.
The DT Midstream CEO received US$6.5m in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does DT Midstream Deserve A Spot On Your Watchlist?
As previously touched on, DT Midstream is a growing business, which is encouraging. And that's not all. We've also seen insiders buying stock, and noted modest executive pay. All things considered, DT Midstream is certainly displaying its merits and is worthy of taking research to the next step. Still, you should learn about the 2 warning signs we've spotted with DT Midstream.
The good news is that DT Midstream is not the only growth stock with insider buying. Here's a list of them... with 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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