Investors often seek out “the next big thing,” which can lead them to invest in speculative companies that may not yet be profitable. Peter Lynch highlighted in his book One Up On Wall Street that chasing such high-risk opportunities often yields poor returns. Companies that are not making a profit are under constant pressure to become financially viable, meaning investors may face added risks.
Conversely, many investors prefer established companies like Corpay (NYSE:CPAY), which already generate both revenue and profit. While Corpay might not be the ultimate investment opportunity, its profitability is an important metric for long-term success.
Examining Corpay’s growth, the company has increased its earnings per share (EPS) by 16% annually over the past three years, signifying solid growth potential if this trend can continue. While Corpay’s earnings before interest and taxes (EBIT) margins remained stable over the past year, the company’s revenue rose by 5.3% to reach US$3.8 billion, which is encouraging.
Investors might also be interested in the company’s future prospects, and a report citing analyst forecasts for Corpay’s profit may provide insights.
Regarding insider ownership, given Corpay’s size, it is expected that insider holdings would not dominate the company’s structure. Nevertheless, insiders have invested significantly, amassing a total stake valued at US$756 million, showcasing their commitment to the company’s future, which is reassuring for shareholders.
Additionally, an analysis of CEO pay suggests that Corpay’s management compensation aligns with shareholder interests. The Corpay CEO earned total compensation of US$2.7 million in 2023, well below the average compensation of US$13 million for CEOs of similar-sized companies, indicating a favorable approach toward shareholder value.
Overall, Corpay’s growth in EPS, modest CEO remuneration, and substantial insider investment make it a candidate worth monitoring for potential investors. However, there are also two warning signs to consider before proceeding.
While investing in stocks that aren’t generating earnings can be beneficial, those looking for companies with solid earnings growth and insider investment might want to explore further options. There are opportunities available in companies that exhibit strong growth alongside significant insider ownership.