Is Now The Time To Put easyJet (LON:EZJ) On Your Watchlist?

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 easyJet (LON:EZJ). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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easyJet's Improving Profits

In the last three years easyJet'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. Thus, it makes sense to focus on more recent growth rates, instead. easyJet boosted its trailing twelve month EPS from UK£0.50 to UK£0.55, in the last year. That's a 10% gain; respectable growth in the broader scheme of things.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of easyJet's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note easyJet achieved similar EBIT margins to last year, revenue grew by a solid 9.4% to UK£9.6b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Check out our latest analysis for easyJet

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for easyJet's future EPS 100% free.

Are easyJet 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

easyJet top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Independent Non-Executive Director, David Robbie, paid UK£41k to buy shares at an average price of UK£5.50. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

On top of the insider buying, it's good to see that easyJet insiders have a valuable investment in the business. Notably, they have an enviable stake in the company, worth UK£650m. That equates to 15% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Alistair Jarvis is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like easyJet with market caps between UK£2.9b and UK£8.8b is about UK£3.0m.

The easyJet CEO received UK£1.8m in compensation for the year ending September 2024. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does easyJet Deserve A Spot On Your Watchlist?

One positive for easyJet is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if easyJet is trading on a high P/E or a low P/E, relative to its industry.

Keen growth investors love to see insider activity. Thankfully, easyJet isn't the only one. You can see a a curated list of British companies which have exhibited consistent growth accompanied by high insider ownership.

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.