We Ran A Stock Scan For Earnings Growth And Webster Financial (NYSE:WBS) Passed With Ease
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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Webster Financial (NYSE:WBS), which has not only revenues, but also profits. 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 Webster Financial
How Quickly Is Webster Financial Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Webster Financial has managed to grow EPS by 28% 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 beaming.
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. It's noted that Webster Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Webster Financial maintained stable EBIT margins over the last year, all while growing revenue 14% to US$2.5b. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Webster Financial's future profits.
Are Webster Financial Insiders Aligned With All Shareholders?
Owing to the size of Webster Financial, we wouldn't expect insiders to hold a significant proportion of the company. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. Holding US$85m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
Is Webster Financial Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into Webster Financial's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Even so, be aware that Webster Financial is showing 1 warning sign in our investment analysis , you should know about...
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
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.
