Here's Why We Think Suncorp Group (ASX:SUN) Might Deserve Your Attention Today
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Suncorp Group (ASX:SUN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Suncorp Group
Suncorp Group's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Impressively, Suncorp Group has grown EPS by 22% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Our analysis has highlighted that Suncorp Group's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. The good news is that Suncorp Group is growing revenues, and EBIT margins improved by 10.4 percentage points to 19%, over the last year. 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. For finer detail, click on the image.
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 Suncorp Group.
Are Suncorp Group Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Any way you look at it Suncorp Group shareholders can gain quiet confidence from the fact that insiders shelled out AU$437k to buy stock, over the last year. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. We also note that it was the Independent Non-Executive Director, Duncan West, who made the biggest single acquisition, paying AU$250k for shares at about AU$10.17 each.
It's reassuring that Suncorp Group insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Namely, Suncorp Group has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Suncorp Group, with market caps over AU$12b, is about AU$5.8m.
Suncorp Group offered total compensation worth AU$4.9m to its CEO in the year to June 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.
Does Suncorp Group Deserve A Spot On Your Watchlist?
For growth investors, Suncorp Group's raw rate of earnings growth is a beacon in the night. To add to the positives, Suncorp Group has recorded instances of insider buying and a modest executive pay to boot. On balance the message seems to be that this stock is worth looking at, at least for a while. Even so, be aware that Suncorp Group is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...
Keen growth investors love to see insider buying. Thankfully, Suncorp Group isn't the only one. You can see a 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.
