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.’ While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 Lamar Advertising (NASDAQ:LAMR). 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 Lamar Advertising
Lamar Advertising’s 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. Lamar Advertising managed to grow EPS by 7.6% per year, over three years. While that sort of growth rate isn’t anything to write home about, it does show the business is growing.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Lamar Advertising achieved similar EBIT margins to last year, revenue grew by a solid 19% to US$1.9b. That’s a real positive.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
NasdaqGS:LAMR Earnings and Revenue History September 13th 2022
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 Lamar Advertising’s future EPS 100% free.
Are Lamar Advertising Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$10b company like Lamar Advertising. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$615m. This suggests that leadership will be very mindful of shareholders’ interests when making decisions!
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Lamar Advertising, with market caps over US$8.0b, is around US$13m.
The Lamar Advertising CEO received total compensation of just US$5.9m in the year to December 2021. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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.
Does Lamar Advertising Deserve A Spot On Your Watchlist?
One positive for Lamar Advertising is that it is growing EPS. That’s nice to see. Earnings growth might be the main attraction for Lamar Advertising, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you’d argue this one is worthy of the watchlist, at least. It is worth noting though that we have found 3 warning signs for Lamar Advertising that you need to take into consideration.
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 free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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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