With EPS Growth And More, Texas Pacific Land (NYSE:TPL) Makes An Interesting Case

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

In contrast to all that, many investors prefer to focus on companies like Texas Pacific Land (NYSE:TPL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Texas Pacific Land with the means to add long-term value to shareholders.

Check out our latest analysis for Texas Pacific Land

How Quickly Is Texas Pacific Land Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Texas Pacific Land has grown EPS by 24% per year, compound, in the last three years. So it's not surprising to see the company trades on a very high multiple of (past) earnings.

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. Texas Pacific Land maintained stable EBIT margins over the last year, all while growing revenue 11% to US$687m. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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

Are Texas Pacific Land Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While Texas Pacific Land insiders did net US$761k selling stock over the last year, they invested US$1.0m, a much higher figure. This overall confidence in the company at current the valuation signals their optimism. We also note that it was the Independent Director, Robert Roosa, who made the biggest single acquisition, paying US$492k for shares at about US$550 each.

On top of the insider buying, it's good to see that Texas Pacific Land insiders have a valuable investment in the business. Indeed, they hold US$47m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. 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$13m.

Texas Pacific Land's CEO took home a total compensation package of US$6.1m in the year prior to December 2023. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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. It can also be a sign of a culture of integrity, in a broader sense.

Is Texas Pacific Land Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Texas Pacific Land's strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. Even so, be aware that Texas Pacific Land is showing 1 warning sign in our investment analysis , you should know about...

Keen growth investors love to see insider activity. Thankfully, Texas Pacific Land isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by high insider ownership.

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.