We Ran A Stock Scan For Earnings Growth And CDW (NASDAQ:CDW) Passed With Ease

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like CDW (NASDAQ:CDW). 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 CDW

How Fast Is CDW 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that CDW has managed to grow EPS by 19% 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.

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 achieved similar EBIT margins to last year, revenue grew by a solid 16% to US$22b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of CDW's forecast profits?

Are CDW 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The US$467k worth of shares that insiders sold during the last 12 months pales in comparison to the US$1.5m they spent on acquiring shares in the company. We find this encouraging because it suggests they are optimistic about CDW'sfuture. It is also worth noting that it was President Christine Leahy who made the biggest single purchase, worth US$500k, paying US$181 per share.

Along with the insider buying, another encouraging sign for CDW is that insiders, as a group, have a considerable shareholding. With a whopping US$76m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Chris Leahy, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like CDW, with market caps over US$8.0b, is about US$14m.

CDW's CEO took home a total compensation package worth US$8.9m in the year leading up to December 2021. 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 good governance, more generally.

Is CDW Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into CDW's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. We don't want to rain on the parade too much, but we did also find 1 warning sign for CDW that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of CDW, you'll probably love this free list of growing companies that insiders are 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.