Here's Why We Think Talen Energy (NASDAQ:TLN) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Talen Energy (NASDAQ:TLN). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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How Fast Is Talen Energy Growing Its Earnings Per Share?

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's easy to see why many investors focus in on EPS growth. In impressive fashion, Talen Energy's EPS grew from US$7.26 to US$12.50, over the previous 12 months. It's a rarity to see 72% year-on-year growth like that.

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. Despite the relatively flat revenue figures, shareholders will be pleased to see EBIT margins have grown from 0.7% to 4.6% in the last 12 months. That's something to smile about.

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

View our latest analysis for Talen Energy

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Talen Energy?

Are Talen Energy 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.

With strong conviction, Talen Energy insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Independent Director, Anthony Horton, paid US$191k to buy shares at an average price of US$191. Purchases like this clue us in to the to the faith management has in the business' future.

The good news, alongside the insider buying, for Talen Energy bulls is that insiders (collectively) have a meaningful investment in the stock. Given insiders own a significant chunk of shares, currently valued at US$62m, they have plenty of motivation to push the business to succeed. This would indicate that the goals of shareholders and management are one and the same.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Mac McFarland is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Talen Energy, with market caps over US$8.0b, is about US$14m.

The CEO of Talen Energy only received US$6.3m in total compensation for the year ending December 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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.

Does Talen Energy Deserve A Spot On Your Watchlist?

Talen Energy's earnings per share have been soaring, with growth rates sky high. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Talen Energy belongs near the top of your watchlist. We should say that we've discovered 2 warning signs for Talen Energy (1 is a bit concerning!) that you should be aware of before investing here.

The good news is that Talen Energy 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.

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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.