If EPS Growth Is Important To You, PPL (NYSE:PPL) Presents An Opportunity

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. 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.

In contrast to all that, many investors prefer to focus on companies like PPL (NYSE:PPL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide PPL with the means to add long-term value to shareholders.

Check out our latest analysis for PPL

How Quickly Is PPL Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. PPL managed to grow EPS by 7.6% per year, over three years. While that sort of growth rate isn't anything to write home about, it does show the business is growing.

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. PPL's EBIT margins have actually improved by 4.0 percentage points in the last year, to reach 22%, but, on the flip side, revenue was down 3.9%. While not disastrous, these figures could be better.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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 PPL's future EPS 100% free.

Are PPL Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$20b company like PPL. But we are reassured by the fact they have invested in the company. As a matter of fact, their holding is valued at US$18m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.09% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to PPL, with market caps over US$8.0b, is around US$13m.

PPL offered total compensation worth US$12m to its CEO in the year to December 2023. That is actually below the median for CEO's of similarly sized companies. 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. It can also be a sign of good governance, more generally.

Is PPL Worth Keeping An Eye On?

One positive for PPL is that it is growing EPS. That's nice to see. The fact that EPS is growing is a genuine positive for PPL, but the pleasant picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Before you take the next step you should know about the 3 warning signs for PPL (2 are concerning!) that we have uncovered.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by significant insider holdings.

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.

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