Should You Be Adding Clearway Energy (NYSE:CWEN.A) To Your Watchlist Today?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Clearway Energy (NYSE:CWEN.A), which has not only revenues, but also profits. 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 Clearway Energy

Clearway Energy's Improving Profits

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for Clearway Energy to have grown EPS from US$0.44 to US$4.98 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.

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. Unfortunately, revenue is down and so are margins. Shareholders will be hoping for a change in fortunes if they're looking for profit growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. 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. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Clearway Energy's future EPS 100% free.

Are Clearway Energy Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like Clearway Energy with market caps between US$4.0b and US$12b is about US$8.1m.

The Clearway Energy CEO received total compensation of just US$3.3m in the year to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Clearway Energy Deserve A Spot On Your Watchlist?

Clearway Energy's earnings per share have been soaring, with growth rates sky high. Such fast EPS growth prompts the question: has the business reached an inflection point? At the same time the reasonable CEO compensation reflects well on the board of directors. So Clearway Energy looks like it could be a good quality growth stock, at first glance. That's worth watching. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Clearway Energy (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

Although Clearway Energy certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.