If You Like EPS Progress Then Examine Out World Wrestling Leisure (NYSE:WWE) Earlier than It is Too Late

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.

Check out our latest analysis for World Wrestling Entertainment

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.

NYSE: WWE earnings and earnings history April 14, 2021

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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World Wrestling Leisure (NYSE:WWE) Might Simply Take On Extra Debt

Some say that volatility, rather than debt, is the best way to view risk as an investor, but Warren Buffett famously said, “Volatility is far from synonymous with risk.” So it can be obvious that when thinking about how risky a particular stock is, that you need to consider debt because too much debt can sink a company. We can see that World Wrestling Entertainment, Inc. ((NYSE: WWE) uses debt in his business. The real question, however, is whether these debts make the company risky.

When is debt dangerous?

Debt is a tool to help businesses grow. However, when a company is unable to pay off its lenders, it is at their mercy. Ultimately, if the company fails to meet its legal debt repayment obligations, shareholders cannot get away with anything. However, a more common (but still costly) occurrence is when a company has to issue stocks at bargain prices and permanently dilute shareholders in order to prop up its balance sheet. The benefit of debt, of course, is that it is often cheap capital, especially when it replaces dilution in a company that is able to reinvest with high returns. When considering how much debt a business is consuming, the first thing to do is to look at the cash and debt together.

Check out our latest analysis for World Wrestling Entertainment

What is World Wrestling Entertainment’s Indebtedness?

The image below, which you can click for more details, shows that World Wrestling Entertainment was in debt of $ 316.8 million in December 2020, down from $ 214.4 million in one year. However, the balance sheet shows that the company holds $ 593.4 million in cash, so it actually has $ 276.6 million net in cash.

NYSE: WWE Debt to Equity Story March 31, 2021

A look at World Wrestling Entertainment’s liabilities

According to its most recently reported balance sheet, World Wrestling Entertainment had liabilities of $ 496.3 million due within 12 months and liabilities of $ 412.3 million due beyond 12 months. This was offset by $ 593.4 million in cash and $ 52.0 million in receivables due within 12 months. So liabilities total $ 263.1 million more than cash and short-term receivables combined.

With publicly traded World Wrestling Entertainment shares valued at $ 4.37 billion, this level of debt is unlikely to pose a major threat. Nonetheless, it is clear that we should continue to monitor the balance sheet so that it does not deteriorate. Despite its remarkable liabilities, World Wrestling Entertainment has net cash, so it is fair to say that it does not have a heavy debt burden!

Additionally, World Wrestling Entertainment has increased EBIT by 84% over the past twelve months, and that growth will make it easier to manage its debt. When analyzing debt, the obvious starting point is the balance sheet. Above all, however, it is future profits that determine World Wrestling Entertainment’s ability to maintain a healthy balance sheet in the future. So if your focus is on the future, this is what you can check out free Analyst earnings forecast report.

After all, a business needs free cash flow to pay off debt. Accounting profits just don’t cut it. While World Wrestling Entertainment has net cash on its balance sheet, it’s still worth taking a look at its ability to convert earnings before interest and taxes (EBIT) into free cash flow to understand how quickly it’s building that up (or undermines) cash balance. For the past three years, World Wrestling Entertainment has actually generated more free cash flow than EBIT. There is nothing like cash when it comes to staying in the good hands of your lenders.

Sum up

While it always makes sense to look at a company’s total debt, it is very comforting that World Wrestling Entertainment has net cash of $ 276.6 million. And it impressed us with free cash flow of $ 292 million, which is 108% of EBIT. We therefore do not consider World Wrestling Entertainment’s use of debt to be risky. There is no doubt that we learn the most about debt from the balance sheet. Ultimately, however, any business may have off-balance sheet risks. For example, we identified 1 warning sign for World Wrestling Entertainment you should be aware of that.

Ultimately, it’s often better to focus on companies that are net debt free. You have access our special list of such companies (all with a track record of earnings growth). It’s free.

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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 want 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.
* StockBrokers.com interactive brokers rated lowest online review 2020

Do you have any feedback on this article? Concerned about the content? Get in touch directly with us. Alternatively, you can also send an email to the editorial team (at) simplywallst.com.