Here's Why We Think Telstra Group (ASX:TLS) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

In contrast to all that, many investors prefer to focus on companies like Telstra Group (ASX:TLS), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Telstra Group

How Quickly Is Telstra Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Telstra Group managed to grow EPS by 5.6% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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 we note Telstra Group achieved similar EBIT margins to last year, revenue grew by a solid 3.4% to AU$23b. That's progress.

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Telstra Group.

Are Telstra Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that Telstra Group insiders spent AU$241k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. It is also worth noting that it was Non-Executive Director Maxine Brenner who made the biggest single purchase, worth AU$116k, paying AU$4.02 per share.

On top of the insider buying, it's good to see that Telstra Group insiders have a valuable investment in the business. Indeed, they hold AU$36m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.08%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Vicki Brady, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Telstra Group, with market caps over AU$12b, is around AU$6.1m.

The Telstra Group CEO received AU$5.2m in compensation for the year ending June 2023. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Telstra Group To Your Watchlist?

One positive for Telstra Group is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Telstra Group , and understanding them should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, Telstra Group isn't the only one. You can see a a curated list of Australian companies which have exhibited consistent growth accompanied by recent insider buying.

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.