With EPS Growth And More, Consolidated Edison (NYSE:ED) Makes An Interesting Case

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 Consolidated Edison (NYSE:ED). 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.

View our latest analysis for Consolidated Edison

Consolidated Edison's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. To the delight of shareholders, Consolidated Edison's EPS soared from US$3.30 to US$4.57, over the last year. That's a impressive gain of 39%.

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. On the revenue front, Consolidated Edison has done well over the past year, growing revenue by 12% to US$15b but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

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

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

Are Consolidated Edison Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$34b company like Consolidated Edison. But thanks to their investment in the company, it's pleasing to see that there are still incentives to align their actions with the shareholders. As a matter of fact, their holding is valued at US$19m. This considerable investment should help drive long-term value in the business. Despite being just 0.06% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to Consolidated Edison, with market caps over US$8.0b, is around US$13m.

The Consolidated Edison CEO received US$10m in compensation for the year ending 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add Consolidated Edison To Your Watchlist?

For growth investors, Consolidated Edison's raw rate of earnings growth is a beacon in the night. If you still have your doubts, remember too that company insiders have a considerable investment aligning themselves with the shareholders and CEO pay is quite modest compared to similarly sized companiess. This may only be a fast rundown, but the key takeaway is that Consolidated Edison is worth keeping an eye on. It is worth noting though that we have found 2 warning signs for Consolidated Edison (1 is a bit unpleasant!) that you need to take into consideration.

Although Consolidated Edison 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.