Is it time to put the stock of investors (NASDAQ: ITIC) on your watch list?
Some have more money than sense, they say, so even companies with no revenue, no profit and a history of failures can easily find investors. But as Peter Lynch said in One Up on Wall Street“Long shots almost never pay off.”
If, on the other hand, you like businesses that generate revenue and even profit, then you might be interested in Investors Title (NASDAQ:ITIC). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. Conversely, a loss-making business has yet to prove itself with profits, and eventually the sweet milk of outside capital can turn sour.
How fast do investors stock rise?
If a company can keep increasing its earnings per share (EPS) long enough, its stock price will eventually follow. So it’s no surprise that I like investing in EPS growth companies. It is certainly pleasing to see that Investors Title has managed to grow EPS by 27% annually over three years. If the company can sustain this type of growth, we expect shareholders to come out on top.
One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. Not all Investors Title income this year is income operations, so keep in mind that the revenue and margin figures I used may not be the best representation of the underlying business. The good news is that Investors Title is growing revenue and EBIT margins have improved by 5.0 percentage points to 25% over the past year. Checking those two boxes is a good sign of growth, in my book.
The chart below shows how the company’s top and bottom line has grown over time. To see the actual numbers, click on the chart.
While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back strong. So check the strength of Investors Title’s balance sheet before you get too excited.
Are investors aligned with all shareholders?
I like that business leaders have some skin in the game, so to speak, because it increases the alignment of incentives between the people running the business and its true owners. Accordingly, I am encouraged that insiders hold Investors Title shares of considerable value. Given that insiders own a small fortune of stock, currently valued at $84 million, they have plenty of motivation to push the company to success. This stake amounts to 23% of the shares issued, thus making influential and aligned insiders the owners of the company.
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. I found that the median total compensation for CEOs of companies like Investors Title with a market capitalization between $200 million and $800 million is around $1.7 million.
The CEO of Investors Title received US$1.4 million in compensation for the year ending . That seems pretty reasonable, especially given that it’s below the median for companies of a similar size. Although the level of CEO compensation is not a determining factor in my view of the company, modest compensation is positive, as it suggests that the board has the interests of shareholders in mind. It can also be a sign of a culture of integrity, broadly defined.
Should you add the stock investors to your watchlist?
Given that I believe share price tracks earnings per share, you can easily imagine how I feel about Investors Title’s strong EPS growth. If that’s not enough, also consider that the CEO’s compensation is quite reasonable and insiders are well invested alongside other shareholders. Each in their own way, but I think all of this makes the title for investors rather interesting. However, you should always think about the risks. Concrete example, we spotted 1 warning sign for investors title you should be aware.
While the stock for investors certainly looks good to me, I’d like it more if insiders were buying stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying might be exactly what you are looking for.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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