Should You Be Adding T. Rowe Price Group (NASDAQ:TROW) To Your Watchlist Today?

By
Simply Wall St
Published
May 11, 2022
NasdaqGS:TROW
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like T. Rowe Price Group (NASDAQ:TROW). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

View our latest analysis for T. Rowe Price Group

T. Rowe Price Group's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, T. Rowe Price Group's EPS has grown 17% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners. And for those who like the finer details, I'll add that the EPS growth has been helped by share buybacks, demonstrating that the business is positioned to return capital to its shareholders.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that T. Rowe Price Group is growing revenues, and EBIT margins improved by 3.1 percentage points to 48%, over the last year. That's great to see, on both counts.

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.

earnings-and-revenue-history
NasdaqGS:TROW Earnings and Revenue History May 11th 2022

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of T. Rowe Price Group's forecast profits?

Are T. Rowe Price Group Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$28b company like T. Rowe Price 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$568m. 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.

Is T. Rowe Price Group Worth Keeping An Eye On?

You can't deny that T. Rowe Price Group has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. What about risks? Every company has them, and we've spotted 2 warning signs for T. Rowe Price Group you should know about.

Although T. Rowe Price 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.

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