Here’s why we think the Perion Network (NASDAQ:PERI) is worth watching
For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it currently lacks a track record of revenue and earnings. Sometimes these stories can cloud investors’ minds, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always in a race against time to achieve financial viability, so investors in these companies may take on more risk than they should.
Despite being in the era of astronomical investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like Perion Network (NASDAQ: PERI). Even if this company is correctly valued by the market, investors would agree that generating consistent earnings will continue to provide Perion Network with the means to add long-term shareholder value.
How fast is Perion Network growing earnings per share?
Typically, companies experiencing earnings per share (EPS) growth should see similar stock price trends. Therefore, there are many investors who like to buy shares in companies that grow EPS. To the delight of shareholders, Perion Network has achieved an impressive annual compounded EPS growth of 47% over the past three years. This type of growth rarely lasts long, but it’s worth paying attention to when it happens.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. Perion Network shareholders can rest assured that EBIT margins have improved from 4.3% to 11% and revenues are growing. It’s great to see, on both counts.
The graph below shows how the company’s bottom line and top results have grown over time. To see the actual numbers, click on the chart.
Luckily, we have access to analyst forecasts from Perion Network coming profits. You can make your own predictions without looking, or you can take a peek at what the pros are predicting.
Are Perion Network insiders aligned with all shareholders?
It’s nice to see business leaders putting their money on the line, so to speak, because it increases the alignment of incentives between the people running the business and its true owners. Followers of the Perion Network will take comfort in knowing that insiders have significant capital that aligns their best interests with those of the broader shareholder group. In fact, their stake is valued at US$41 million. That’s a lot of money, and no small incentive to work hard. Although their stake is only 4.9%, it is still a considerable amount at stake to encourage the company to maintain a strategy that will bring value to shareholders.
It’s good to see that insiders are invested in the company, but are the compensation levels reasonable? A brief analysis of CEO compensation suggests they are. Our analysis found that the median total compensation for CEOs of companies like Perion Network with a market capitalization between $400 million and $1.6 billion is around $4.0 million.
The Perion Network CEO received $2.8 million in compensation for the year ending December 2021. That’s actually lower than the median for CEOs of similar-sized companies. CEO pay levels aren’t the most important metric for investors, but when pay is modest, it promotes better alignment between the CEO and ordinary shareholders. It can also be a sign of a culture of integrity, broadly defined.
Does Perion Network deserve a spot on your watch list?
Perion Network’s revenue took off quite impressively. An added bonus for those interested is that the management owns a bunch of stock and the CEO compensation is quite reasonable, illustrating good cash management. The strong improvement in EPS suggests businesses are doing well. Perion Network certainly ticks a few boxes, so we think it’s probably worth looking into further. Still, the ubiquitous specter of investment risk must be taken into account. We have identified 1 warning sign with Perion Network, and understanding it should be part of your investment process.
Although Perion Network certainly looks good, it could attract more investors if insiders buy shares. If you like seeing insiders buy, then this free list of growing companies that insiders are buying might be exactly what you’re looking for.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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