Werner Enterprises (NASDAQ:WERN) Ticks All The Boxes When It Comes To Earnings Growth
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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Werner Enterprises (NASDAQ:WERN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Werner Enterprises
Werner Enterprises' Earnings Per Share Are Growing
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 Werner Enterprises has managed to grow EPS by 18% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. While Werner Enterprises did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.
The chart below shows how the company's bottom and top lines have progressed 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 Werner Enterprises' future EPS 100% free.
Are Werner Enterprises 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Not only did Werner Enterprises insiders refrain from selling stock during the year, but they also spent US$98k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading.
On top of the insider buying, it's good to see that Werner Enterprises insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$118m. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, Derek Leathers is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Werner Enterprises, with market caps between US$2.0b and US$6.4b, is around US$6.6m.
Werner Enterprises' CEO took home a total compensation package worth US$5.3m in the year leading up to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Does Werner Enterprises Deserve A Spot On Your Watchlist?
For growth investors, Werner Enterprises' raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 2 warning signs for Werner Enterprises (1 shouldn't be ignored!) that we have uncovered.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Werner Enterprises, you'll probably love this free list of growing companies that insiders are buying.
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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