Do DT Midstream's (NYSE:DTM) Earnings Warrant Your Attention?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in DT Midstream (NYSE:DTM). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out the opportunities and risks within the US Oil and Gas industry.

How Fast Is DT Midstream Growing Its Earnings Per Share?

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. To the delight of shareholders, DT Midstream's EPS soared from US$2.99 to US$3.84, over the last year. That's a fantastic gain of 29%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. On the one hand, DT Midstream's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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.

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

Are DT Midstream Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

For the sake of balance, it should be noted that DT Midstream insiders sold US$40k worth of shares last year. This falls short of the share acquisition by Independent Director Peter Tumminello, who has acquired US$164k worth of shares, at an average price of US$54.80. And that's a reason to be optimistic.

It's commendable to see that insiders have been buying shares in DT Midstream, but there is more evidence of shareholder friendly management. Namely, DT Midstream has a very reasonable level of CEO pay. Our analysis has discovered that the median total compensation for the CEOs of companies like DT Midstream with market caps between US$4.0b and US$12b is about US$8.2m.

DT Midstream's CEO took home a total compensation package worth US$6.5m in the year leading up to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does DT Midstream Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into DT Midstream's strong EPS growth. To add to the positives, DT Midstream has recorded instances of insider buying and a modest executive pay to boot. On balance the message seems to be that this stock is worth looking at, at least for a while. It is worth noting though that we have found 2 warning signs for DT Midstream that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of DT Midstream, you'll probably love this free list of growing companies that insiders are 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.