Should You Be Adding WSP Global (TSE:WSP) To Your Watchlist Today?

By
Simply Wall St
Published
January 10, 2022
TSX:WSP
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like WSP Global (TSE:WSP). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for WSP Global

How Fast Is WSP Global Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, WSP Global has grown EPS by 16% per year. That's a pretty good rate, if the company can sustain it.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note WSP Global's EBIT margins were flat over the last year, revenue grew by a solid 9.9% to CA$9.6b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
TSX:WSP Earnings and Revenue History January 10th 2022

Fortunately, we've got access to analyst forecasts of WSP Global's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are WSP Global Insiders Aligned With All Shareholders?

Since WSP Global has a market capitalization of CA$21b, we wouldn't expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Given insiders own a small fortune of shares, currently valued at CA$105m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Is WSP Global Worth Keeping An Eye On?

As I already mentioned, WSP Global is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for WSP Global you should be aware of.

Although WSP Global certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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