With EPS Growth And More, Everest Group (NYSE:EG) Makes An Interesting Case

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

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 Everest Group (NYSE:EG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Everest Group

Everest Group's Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Everest Group to have grown EPS from US$15.18 to US$57.35 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. Could this be a sign that the business has reached an inflection point?

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The music to the ears of Everest Group shareholders is that EBIT margins have grown from 6.5% to 16% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Everest Group.

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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news is that Everest Group insiders spent a whopping US$1.4m on stock in just one year, without so much as a single sale. Knowing this, Everest Group will have have all eyes on them in anticipation for the what could happen in the near 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.

The good news, alongside the insider buying, for Everest Group bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$228m. 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 already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Everest Group's CEO, Juan Andrade, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Everest Group, with market caps over US$8.0b, is around US$12m.

Everest Group's CEO took home a total compensation package worth US$9.1m in the year leading up to December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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.

Is Everest Group Worth Keeping An Eye On?

Everest Group's earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Everest Group belongs near the top of your watchlist. Before you take the next step you should know about the 1 warning sign for Everest Group that we have uncovered.

Keen growth investors love to see insider buying. Thankfully, Everest Group isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by recent insider 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.