Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in WEC Energy Group (NYSE:WEC). 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.
WEC Energy Group's Earnings Per Share Are Growing
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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years WEC Energy Group grew its EPS by 7.7% per year. 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. EBIT margins for WEC Energy Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to US$9.0b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of WEC Energy Group's forecast profits?
Are WEC Energy Group 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, small purchases are not always indicative of conviction, and insiders don't always get it right.
While some insiders did sell some of their holdings in WEC Energy Group, one lone insider trumped that with significant stock purchases. Specifically the Independent Director, Thomas Lane, spent US$537k, paying about US$89.47 per share. It's hard to ignore news like that.
The good news, alongside the insider buying, for WEC Energy Group bulls is that insiders (collectively) have a meaningful investment in the stock. Holding US$58m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
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, Scott Lauber, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to WEC Energy Group, with market caps over US$8.0b, is around US$13m.
The CEO of WEC Energy Group only received US$5.0m in total compensation for the year ending December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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 WEC Energy Group Worth Keeping An Eye On?
One positive for WEC Energy Group is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We don't want to rain on the parade too much, but we did also find 3 warning signs for WEC Energy Group (1 is concerning!) that you need to be mindful of.
The good news is that WEC Energy Group is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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.
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