Is Now The Time To Put MYR Group (NASDAQ:MYRG) On Your Watchlist?
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 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 MYR Group (NASDAQ:MYRG). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for MYR Group
How Fast Is MYR Group 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) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, MYR Group has grown EPS by 36% 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.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note MYR Group achieved similar EBIT margins to last year, revenue grew by a solid 9.5% to US$2.5b. 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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for MYR Group's future EPS 100% free.
Are MYR Group 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. So it is good to see that MYR Group insiders have a significant amount of capital invested in the stock. To be specific, they have US$38m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 2.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
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. The median total compensation for CEOs of companies similar in size to MYR Group, with market caps between US$1.0b and US$3.2b, is around US$5.5m.
MYR Group's CEO took home a total compensation package worth US$4.1m in the year leading up to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. 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.
Should You Add MYR Group To Your Watchlist?
You can't deny that MYR Group has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes MYR Group look rather interesting indeed. Now, you could try to make up your mind on MYR Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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