We Ran A Stock Scan For Earnings Growth And InterContinental Hotels Group (LON:IHG) Passed With Ease

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 InterContinental Hotels Group (LON:IHG). 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 InterContinental Hotels Group

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

In the last three years InterContinental Hotels Group's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, InterContinental Hotels Group's EPS soared from US$2.37 to US$3.76, over the last year. That's a impressive gain of 59%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for InterContinental Hotels Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 24% to US$3.4b. That's progress.

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.

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 InterContinental Hotels Group.

Are InterContinental Hotels Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a UK£12b company like InterContinental Hotels Group. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$22m worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 0.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? 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$5.2m.

InterContinental Hotels Group offered total compensation worth US$3.9m to its CEO in the year to December 2022. That seems pretty reasonable, especially given it's below the median for similar 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.

Does InterContinental Hotels Group Deserve A Spot On Your Watchlist?

You can't deny that InterContinental Hotels Group has grown its earnings per share at a very impressive rate. That's attractive. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. Everyone has their own preferences when it comes to investing but it definitely makes InterContinental Hotels Group look rather interesting indeed. Still, you should learn about the 2 warning signs we've spotted with InterContinental Hotels Group.

Although InterContinental Hotels Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of British companies that not only boast of strong growth but have also seen 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.