Does Cellcom Israel (TLV:CEL) Deserve A Spot 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Cellcom Israel (TLV:CEL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

We've discovered 1 warning sign about Cellcom Israel. View them for free.

How Quickly Is Cellcom Israel Increasing Earnings Per Share?

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. Impressively, Cellcom Israel has grown EPS by 25% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. It seems Cellcom Israel is pretty stable, since revenue and EBIT margins are pretty flat year on year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

View our latest analysis for Cellcom Israel

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Cellcom Israel's balance sheet strength, before getting too excited.

Are Cellcom Israel Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Cellcom Israel will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 35% of the company to their names, insiders are profoundly invested in the business. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. That means they have plenty of their own capital riding on the performance of the business!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between ₪1.5b and ₪5.9b, like Cellcom Israel, the median CEO pay is around ₪3.5m.

Cellcom Israel offered total compensation worth ₪3.2m to its CEO in the year to December 2023. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Cellcom Israel Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Cellcom Israel's strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Cellcom Israel has underlying strengths that make it worth a look at. What about risks? Every company has them, and we've spotted 1 warning sign for Cellcom Israel you should know about.

Although Cellcom Israel certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Israeli companies that not only boast of strong growth but have strong insider backing.

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.