Should You Be Adding Weir Group (LON:WEIR) To Your Watchlist Today?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Weir Group (LON:WEIR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Weir Group with the means to add long-term value to shareholders.

Check out our latest analysis for Weir Group

Weir Group's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Weir Group's EPS has grown 37% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Weir Group maintained stable EBIT margins over the last year, all while growing revenue 8.9% to UK£2.1b. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Weir Group?

Are Weir Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's nice to see that there have been no reports of any insiders selling shares in Weir Group in the previous 12 months. So it's definitely nice that Independent Chairman Barbara Jeremiah bought UK£35k worth of shares at an average price of around UK£17.37. It seems that at least one insider is prepared to show the market there is potential within Weir Group.

It's commendable to see that insiders have been buying shares in Weir Group, but there is more evidence of shareholder friendly management. Namely, Weir Group has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like Weir Group with market caps between UK£3.4b and UK£10b is about UK£2.6m.

Weir Group offered total compensation worth UK£1.8m to its CEO in the year to December 2021. That is actually below the median for CEO's of similarly sized companies. 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.

Is Weir Group Worth Keeping An Eye On?

You can't deny that Weir Group has grown its earnings per share at a very impressive rate. That's attractive. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The overriding message from this quick rundown is yes, this stock is worth investigating further. Still, you should learn about the 1 warning sign we've spotted with Weir Group.

The good news is that Weir Group is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.