If You Like EPS Growth Then Check Out TransUnion (NYSE:TRU) Before It's Too Late

By
Simply Wall St
Published
November 28, 2021
NYSE:TRU
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like TransUnion (NYSE:TRU). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for TransUnion

How Fast Is TransUnion 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 it's no surprise that some investors are more inclined to invest in profitable businesses. Like a wedge-tailed eagle on the wind, TransUnion's EPS soared from US$1.71 to US$2.46, in just one year. That's a commendable gain of 44%.

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. The good news is that TransUnion is growing revenues, and EBIT margins improved by 2.0 percentage points to 25%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
NYSE:TRU Earnings and Revenue History November 29th 2021

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for TransUnion?

Are TransUnion Insiders Aligned With All Shareholders?

Since TransUnion has a market capitalization of US$21b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Given insiders own a small fortune of shares, currently valued at US$84m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like TransUnion, with market caps over US$8.0b, is about US$11m.

The TransUnion CEO received US$8.6m in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Is TransUnion Worth Keeping An Eye On?

You can't deny that TransUnion has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the takeaway for me is that TransUnion is worth keeping an eye on. You should always think about risks though. Case in point, we've spotted 1 warning sign for TransUnion you should be aware of.

Although TransUnion 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.

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