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 completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in PNC Financial Services Group (NYSE:PNC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Fast Is PNC Financial Services Group Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, PNC Financial Services Group has grown EPS by 12% per year. That's a good rate of growth, if it can be sustained.
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. I note that PNC Financial Services Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note PNC Financial Services Group's EBIT margins were flat over the last year, revenue grew by a solid 46% to US$20b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for PNC Financial Services Group's future profits.
Are PNC Financial Services Group Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$81b company like PNC Financial Services Group. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$270m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Should You Add PNC Financial Services Group To Your Watchlist?
As I already mentioned, PNC Financial Services Group is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with PNC Financial Services Group , and understanding it should be part of your investment process.
Although PNC Financial Services Group certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.
What are the risks and opportunities for PNC Financial Services Group?
Trading at 28.5% below our estimate of its fair value
Earnings are forecast to grow 2.76% per year
Earnings grew by 6% over the past year
No risks detected for PNC from our risks checks.
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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.