Is Now The Time To Put Texas Pacific Land (NYSE:TPL) On Your Watchlist?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Texas Pacific Land (NYSE:TPL). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Texas Pacific Land

Texas Pacific Land's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Texas Pacific Land has managed to grow EPS by 23% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. While we note Texas Pacific Land achieved similar EBIT margins to last year, revenue grew by a solid 30% to US$666m. That's a real positive.

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.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Texas Pacific Land 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Texas Pacific Land is that one insider has illustrated their belief in the company's future with a huge purchase of shares in the last 12 months. Specifically, in one large transaction Independent Trustee Murray Stahl paid US$16k, for stock at US$2,618 per share. Big insider buys like that are a rarity and should prompt discussion on the merits of the business.

On top of the insider buying, it's good to see that Texas Pacific Land insiders have a valuable investment in the business. As a matter of fact, their holding is valued at US$13m. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Texas Pacific Land's CEO, Tyler Glover, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations over US$8.0b, like Texas Pacific Land, the median CEO pay is around US$12m.

Texas Pacific Land's CEO took home a total compensation package worth US$6.3m in the year leading up to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Texas Pacific Land To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Texas Pacific Land's strong EPS growth. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. These things considered, this is one stock worth watching. Now, you could try to make up your mind on Texas Pacific Land by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

The good news is that Texas Pacific Land is not the only growth stock with insider buying. Here's a list of them... 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.