Stock Analysis

Do InterContinental Hotels Group's (LON:IHG) Earnings Warrant Your Attention?

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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 InterContinental Hotels Group (LON:IHG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide InterContinental Hotels Group with the means to add long-term value to shareholders.

See our latest analysis for InterContinental Hotels Group

How Fast Is InterContinental Hotels Group Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. To the delight of shareholders, InterContinental Hotels Group's EPS soared from US$1.45 to US$2.15, over the last year. That's a impressive gain of 48%.

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 InterContinental Hotels Group achieved similar EBIT margins to last year, revenue grew by a solid 32% to US$3.1b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

LSE:IHG Earnings and Revenue History March 23rd 2023

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of InterContinental Hotels Group's forecast profits?

Are InterContinental Hotels Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a UK£9.3b company like InterContinental Hotels Group. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$28m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

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. Our analysis has discovered that the median total compensation for the CEOs of companies like InterContinental Hotels Group, with market caps over US$8.0b, is about US$5.8m.

InterContinental Hotels Group's CEO took home a total compensation package worth US$4.9m in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is InterContinental Hotels Group Worth Keeping An Eye On?

For growth investors, InterContinental Hotels Group's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes InterContinental Hotels Group look rather interesting indeed. Even so, be aware that InterContinental Hotels Group is showing 4 warning signs in our investment analysis , you should know about...

Although InterContinental Hotels Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.

Valuation is complex, but we're helping make it simple.

Find out whether InterContinental Hotels Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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