With EPS Growth And More, Cullen/Frost Bankers (NYSE:CFR) Makes An Interesting Case

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.

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 Cullen/Frost Bankers (NYSE:CFR). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Our analysis indicates that CFR is potentially undervalued!

How Fast Is Cullen/Frost Bankers Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Cullen/Frost Bankers boosted its trailing twelve month EPS from US$6.64 to US$7.44, in the last year. There's little doubt shareholders would be happy with that 12% gain.

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. It's noted that Cullen/Frost Bankers' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Cullen/Frost Bankers remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 15% to US$1.5b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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 Cullen/Frost Bankers?

Are Cullen/Frost Bankers Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$9.1b company like Cullen/Frost Bankers. But we do take comfort from the fact that they are investors in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$267m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

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 Cullen/Frost Bankers with market caps between US$4.0b and US$12b is about US$8.1m.

Cullen/Frost Bankers offered total compensation worth US$5.2m to its CEO in the year to December 2021. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Cullen/Frost Bankers To Your Watchlist?

One positive for Cullen/Frost Bankers is that it is growing EPS. That's nice to see. Earnings growth might be the main attraction for Cullen/Frost Bankers, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Before you take the next step you should know about the 1 warning sign for Cullen/Frost Bankers that we have uncovered.

Although Cullen/Frost Bankers 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.

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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.