Here's Why Spire (NYSE:SR) Has Caught The Eye Of Investors

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. 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 Spire (NYSE:SR). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Spire with the means to add long-term value to shareholders.

Check out our latest analysis for Spire

Spire's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Spire has achieved impressive annual EPS growth of 55%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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 one hand, Spire's EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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

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 Spire's future EPS 100% free.

Are Spire 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Despite US$47k worth of sales, Spire insiders have overwhelmingly been buying the stock, spending US$351k on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. Zooming in, we can see that the biggest insider purchase was by Director Paul Koonce for US$296k worth of shares, at about US$59.27 per share.

The good news, alongside the insider buying, for Spire bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$28m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 0.9%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Suzanne Sitherwood, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Spire with market caps between US$2.0b and US$6.4b is about US$6.7m.

The Spire CEO received US$5.0m in compensation for the year ending September 2022. That is actually below the median for CEO's of similarly sized companies. 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.

Is Spire Worth Keeping An Eye On?

Spire's earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Spire belongs near the top of your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Spire (at least 1 which is potentially serious) , and understanding these should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, Spire 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.