Is Now The Time To Put CDW (NASDAQ:CDW) On Your Watchlist?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like CDW (NASDAQ:CDW). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for CDW

How Quickly Is CDW Increasing Earnings Per Share?

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). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, CDW has grown EPS by 19% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note CDW's EBIT margins were flat over the last year, revenue grew by a solid 12% to US$20b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future CDW EPS 100% free.

Are CDW Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$26b company like CDW. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$103m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. I discovered that the median total compensation for the CEOs of companies like CDW, with market caps over US$8.0b, is about US$11m.

CDW offered total compensation worth US$6.3m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me 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 CDW Worth Keeping An Eye On?

You can't deny that CDW has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. This may only be a fast rundown, but the takeaway for me is that CDW is worth keeping an eye on. Before you take the next step you should know about the 1 warning sign for CDW that we have uncovered.

Although CDW certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.