Does Webster Financial (NYSE:WBS) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Webster Financial (NYSE:WBS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Webster Financial with the means to add long-term value to shareholders.

See our latest analysis for Webster Financial

How Quickly Is Webster Financial 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. Over the last three years, Webster Financial has grown EPS by 13% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Our analysis has highlighted that Webster Financial's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Webster Financial achieved similar EBIT margins to last year, revenue grew by a solid 98% to US$2.5b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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 Webster Financial.

Are Webster Financial Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$6.8b company like Webster Financial. But we do take comfort from the fact that they are investors in the company. Given insiders own a significant chunk of shares, currently valued at US$76m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Does Webster Financial Deserve A Spot On Your Watchlist?

One important encouraging feature of Webster Financial is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. We should say that we've discovered 1 warning sign for Webster Financial that you should be aware of before investing here.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.