Does Consolidated Edison (NYSE:ED) Deserve A Spot On Your Watchlist?

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.

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

View our latest analysis for Consolidated Edison

How Fast Is Consolidated Edison 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. Over the last three years, Consolidated Edison has grown EPS by 5.4% per year. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Consolidated Edison achieved similar EBIT margins to last year, revenue grew by a solid 15% to US$16b. That's encouraging news for the company!

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.

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 Consolidated Edison?

Are Consolidated Edison Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Shareholders in Consolidated Edison will be more than happy to see insiders committing themselves to the company, spending US$290k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. Zooming in, we can see that the biggest insider purchase was by Senior VP & CFO Robert Hoglund for US$13k worth of shares, at about US$95.67 per share.

On top of the insider buying, it's good to see that Consolidated Edison insiders have a valuable investment in the business. Indeed, they hold US$22m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.06% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Consolidated Edison's CEO, Tim Cawley, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Consolidated Edison, with market caps over US$8.0b, is about US$13m.

The Consolidated Edison CEO received US$9.6m in compensation for the year ending December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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.

Should You Add Consolidated Edison To Your Watchlist?

One important encouraging feature of Consolidated Edison is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. It is worth noting though that we have found 2 warning signs for Consolidated Edison (1 is potentially serious!) that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Consolidated Edison isn't the only one. You can see a a free list of them here.

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.