Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In contrast to all that, I prefer to spend time on companies like Zions Bancorporation National Association (NASDAQ:ZION), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Zions Bancorporation National Association's Earnings Per Share Are Growing.
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Zions Bancorporation National Association has managed to grow EPS by 35% 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 smiling. And for those who like the finer details, I'll add that the EPS growth has been helped by share buybacks, demonstrating that the business is positioned to return capital to its shareholders.
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. I note that Zions Bancorporation National Association's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Zions Bancorporation National Association reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Zions Bancorporation National Association?
Are Zions Bancorporation National Association Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$8.7b company like Zions Bancorporation National Association. But we are reassured by the fact they have invested in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$120m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations between US$4.0b and US$12b, like Zions Bancorporation National Association, the median CEO pay is around US$6.7m.
The Zions Bancorporation National Association CEO received US$4.4m in compensation for the year ending December 2018. That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Should You Add Zions Bancorporation National Association To Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Zions Bancorporation National Association's strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the takeaway for me is that Zions Bancorporation National Association is worth keeping an eye on. Now, you could try to make up your mind on Zions Bancorporation National Association by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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