Here's Why Everest Group (NYSE:EG) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Everest Group (NYSE:EG). 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.

Check out our latest analysis for Everest Group

Everest Group's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Everest Group has achieved impressive annual EPS growth of 46%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Everest Group shareholders can take confidence from the fact that EBIT margins are up from 7.9% to 17%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Everest Group's future EPS 100% free.

Are Everest Group 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We do note that, in the last year, insiders sold US$380k worth of shares. But that's far less than the US$1.4m insiders spent purchasing stock. This bodes well for Everest Group as it highlights the fact that those who are important to the company having a lot of faith in its future. Zooming in, we can see that the biggest insider purchase was by Executive VP & Group CFO Mark Kociancic for US$349k worth of shares, at about US$349 per share.

Along with the insider buying, another encouraging sign for Everest Group is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$226m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, Juan Andrade, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Everest Group, with market caps over US$8.0b, is around US$14m.

The Everest Group CEO received US$9.9m in compensation for the year ending December 2023. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Everest Group To Your Watchlist?

Everest Group's earnings have taken off in quite an impressive fashion. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Everest Group deserves timely attention. Of course, just because Everest Group is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

The good news is that Everest Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in the US 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com