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Do Landstar System's (NASDAQ:LSTR) Earnings Warrant Your Attention?
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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Landstar System (NASDAQ:LSTR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Landstar System with the means to add long-term value to shareholders.
Check out our latest analysis for Landstar System
How Fast Is Landstar System 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. It certainly is nice to see that Landstar System has managed to grow EPS by 28% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. EBIT margins for Landstar System remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to US$7.4b. 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.
Fortunately, we've got access to analyst forecasts of Landstar System's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Landstar System Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$6.3b company like Landstar System. But we are reassured by the fact they have invested in the company. With a whopping US$67m worth of shares as a group, insiders have plenty riding on the company's success. This would indicate that the goals of shareholders and management are one and the same.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Landstar System with market caps between US$4.0b and US$12b is about US$8.3m.
The Landstar System CEO received US$5.4m in compensation for the year ending December 2021. That is actually below the median for CEO's of similarly sized companies. 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 good governance, more generally.
Does Landstar System Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Landstar System's strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Landstar System has underlying strengths that make it worth a look at. We don't want to rain on the parade too much, but we did also find 2 warning signs for Landstar System (1 is a bit unpleasant!) that you need to be mindful of.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.
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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.
Landstar System, Inc. provides integrated transportation management solutions in the United States, Canada, Mexico, and internationally.
Excellent balance sheet established dividend payer.