Investors are often driven by the idea of discovering “the next big thing”, even if that means buying “historic stocks” without any income, let alone profit. Sometimes these stories can cloud investors’ minds, leading them to invest with their emotions rather than on the merit of good company fundamentals. Although a well-funded business may suffer losses for years, it will eventually have to turn a profit or investors will move on and the business will wither away.
If this type of business isn’t your style, and you like businesses that generate revenue or even profit, then you might be interested in ARC Resources (TSE: ARX). While that doesn’t necessarily mean it’s undervalued, the company’s profitability is enough to warrant some appreciation, especially if it’s growing.
Check out our latest analysis for ARC Resources
ARC Resources earnings per share increase
Typically, companies experiencing earnings per share (EPS) growth should see similar stock price trends. This makes EPS growth an attractive quality for any business. ARC Resources shareholders have reason to celebrate as their annual EPS growth over the past 3 years has been 47%. Although this type of growth rate is not sustainable for long, it certainly attracts the attention of potential investors.
It’s often helpful to look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another idea of the quality of the company’s growth. ARC Resources shareholders can be confident that EBIT margins have improved from -26% to 26% and revenues are growing. It’s great to see, on both counts.
You can check the company’s revenue and profit growth trend in the table below. Click on the table to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check this out free ARC Resources’ interactive visualization provide profits?
Are ARC Resources insiders aligned with all shareholders?
Given that ARC Resources has a market capitalization of C$12 billion, we wouldn’t expect insiders to hold a high percentage of shares. But we are reassured by the fact that they are investors in the company. Indeed, they hold for 31 million Canadian dollars of its shares. This considerable investment should contribute to generating long-term value in the company. Although it represents only 0.3% of the company, the value of this investment is enough to show that insiders have a lot to do with the company.
It’s good to see that insiders are invested in the company, but are the compensation levels reasonable? A brief analysis of CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to ARC Resources, with market capitalizations between C$5.5 billion and C$16 billion, is around C$6.4 million.
ARC Resources offered total compensation worth C$4.4 million to its CEO in the year to December 2021. That’s actually below the median for CEOs of size companies. similar. CEO pay levels aren’t the most important metric for investors, but when pay is modest, it promotes better alignment between the CEO and ordinary shareholders. It can also be a sign of a culture of integrity, broadly defined.
Should you add ARC resources to your watchlist?
Earnings per share at ARC Resources soared, with skyrocketing growth rates. The sweetener is that the insiders have a mountain of stock and the CEO compensation is quite reasonable. The strong improvement in EPS suggests businesses are doing well. Big growth can make big winners, so the writing on the wall tells us that ARC Resources deserves careful consideration. However, you should inquire about the 2 warning signs we spotted with ARC Resources.
While ARC Resources certainly looks good, it could attract more investors if insiders buy shares. If you like seeing insiders buy, then this free list of growing companies that insiders are buying might be exactly what you are looking for.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
Valuation is complex, but we help make it simple.
Find out if ARC Resources is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.