Is Now The Time To Put Loews (NYSE:L) On Your Watchlist?
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. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Loews (NYSE:L). 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 Loews
How Fast Is Loews Growing Its Earnings Per Share?
In the last three years Loews' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Loews' EPS skyrocketed from US$4.25 to US$5.52, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 30%.
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. Our analysis has highlighted that Loews' 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. EBIT margins for Loews remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 8.3% to US$15b. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Loews' balance sheet strength, before getting too excited.
Are Loews 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The good news for Loews is that one insider has illustrated their belief in the company's future with a huge purchase of shares in the last 12 months. In other words, the Senior VP of Corporate Development & Strategy, Benjamin Tisch, acquired US$19m worth of shares over the previous 12 months at an average price of around US$56.91. Big insider buys like that are a rarity and should prompt discussion on the merits of the business.
On top of the insider buying, it's good to see that Loews insiders have a valuable investment in the business. Notably, they have an enviable stake in the company, worth US$2.6b. That equates to 18% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Loews' CEO, James Tisch, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Loews, with market caps over US$8.0b, is around US$12m.
Loews' CEO took home a total compensation package worth US$6.4m in the year leading up to December 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 Loews Deserve A Spot On Your Watchlist?
You can't deny that Loews has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. 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 Loews is trading on a high P/E or a low P/E, relative to its industry.
The good news is that Loews 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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