Should You Be Adding Zurn Elkay Water Solutions (NYSE:ZWS) To Your Watchlist Today?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Zurn Elkay Water Solutions (NYSE:ZWS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Zurn Elkay Water Solutions with the means to add long-term value to shareholders.

Check out our latest analysis for Zurn Elkay Water Solutions

Zurn Elkay Water Solutions' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Zurn Elkay Water Solutions managed to grow EPS by 4.8% per year, over three years. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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. Zurn Elkay Water Solutions maintained stable EBIT margins over the last year, all while growing revenue 19% 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. Click on the chart to see the exact numbers.

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 Zurn Elkay Water Solutions?

Are Zurn Elkay Water Solutions Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$5.4b company like Zurn Elkay Water Solutions. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. We note that their impressive stake in the company is worth US$181m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? 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 Zurn Elkay Water Solutions with market caps between US$4.0b and US$12b is about US$7.7m.

The CEO of Zurn Elkay Water Solutions only received US$1.4m in total compensation for the year ending December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Zurn Elkay Water Solutions Worth Keeping An Eye On?

One important encouraging feature of Zurn Elkay Water Solutions is that it is growing profits. The growth of EPS may be the eye-catching headline for Zurn Elkay Water Solutions, but there's more to bring joy for shareholders. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Before you take the next step you should know about the 1 warning sign for Zurn Elkay Water Solutions that we have uncovered.

Although Zurn Elkay Water Solutions certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..

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.