It is only natural that many investors, especially those new to the game, prefer to buy stocks in “sexy” stocks with a good history, even if those companies are losing money. But as Warren Buffett mused, “If you’ve been playing poker for half an hour and still don’t know who the patsy is, you are the patsy.” Too often, when buying story stocks like this, investors are the patsy.
In contrast, I prefer to spend time with companies like World Wrestling Entertainment ((NYSE: WWE), which not only has sales but also profits. Well, I’m not saying the stock is necessarily undervalued today; But I can’t shake the appreciation for the profitability of the business itself. While a well-funded business can suffer years of losses, it must ultimately make a profit or take its last breath unless its owners have an endless appetite for subsidizing the customer.
How fast is World Wrestling Entertainment growing?
In the long run, if you think the markets are even vaguely efficient, expect a company’s stock price to track earnings per share (EPS). This makes EPS growth an attractive quality for every company. For one thing, I’m overwhelmed by the fact that World Wrestling Entertainment has increased EPS by 58% per year for the past three years. This type of growth never lasts long, but like a shooting star, it is worth watching when it happens.
One way to examine a company’s growth is to examine how sales and earnings before interest and taxes (EBIT) are changing. This approach makes World Wrestling Entertainment look pretty good overall. Although sales are flat, EBIT margins improved from 12% to 23% last year. That’s really positive.
The table below shows how the company has grown its profits and sales over time. Click the table to see the exact numbers.
The trick as an investor is to find companies that will perform well in the future, not just in the past. To that end, you can check now and today our visualization of consensus analysts’ forecasts for World Wrestling Entertainment’s future EPS 100% free.
Are World Wrestling Entertainment Insiders Targeting All Shareholders?
Many consider high inside participation a strong sign of coordination between a company’s executives and common shareholders. We’re excited to announce that World Wrestling Entertainment insiders have a significant stake in the business. In fact, insiders are deeply invested in the business, with 41% of the company. I am always comforted by solid Insider Owners like this as it implies that those who run the company are genuinely motivated to create shareholder value. And their stake is extremely valuable at the current share price of $ 1.8 billion. That means they have a lot of their own capital that depends on the performance of the business!
It means a lot to see insiders invest in the business, but I wonder if the compensation policy is shareholder friendly. A brief analysis of the CEO’s compensation suggests that it is. For companies with a market cap between $ 2.0 billion and $ 6.4 billion, such as World Wrestling Entertainment, the average CEO compensation is $ 5.1 million.
World Wrestling Entertainment CEO received US $ 3.5 million in compensation for the year-end. That seems pretty reasonable, especially given the below median score for companies of similar size. CEO compensation levels are not the most important metric for investors, but when compensation is modest, it supports improved alignment between the CEO and common shareholders. It can also be a sign of a culture of integrity in a broader sense.
Does World Wrestling Entertainment deserve a place on your watchlist?
World Wrestling Entertainment’s earnings per share growth has risen higher, like a mountain goat climbing the Alps. The sweetener is that insiders have a mountain of stocks and the CEO’s compensation is perfectly reasonable. The sharp rise in earnings could indicate good business momentum. World Wrestling Entertainment certainly meets some of my criteria, so I think it is probably worth further consideration. You still need to be aware of risks, for example – World Wrestling Entertainment has 1 warning sign We think you should be aware of this.
Of course, you can (sometimes) well buy stocks that don’t increase profits and insiders don’t buy stocks. But as a growth investor, I always enjoy looking at companies that do that to do have these functions. You can access it a free list of them here.
Please note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell stocks and does not take into account your goals or your financial situation. We would like to provide you with a long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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