With EPS Growth And More, PPL (NYSE:PPL) Makes An Interesting Case

Simply Wall St · 10/17 10:10

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like PPL (NYSE:PPL), which has not only revenues, but also profits. 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.

View our latest analysis for PPL

How Quickly Is PPL Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. PPL's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 57%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Unfortunately, PPL's revenue dropped 4.7% last year, but the silver lining is that EBIT margins improved from 18% to 24%. That falls short of ideal.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:PPL Earnings and Revenue History October 17th 2024

Fortunately, we've got access to analyst forecasts of PPL's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are PPL Insiders Aligned With All Shareholders?

Since PPL has a market capitalisation of US$24b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Indeed, they hold US$20m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.09%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Should You Add PPL To Your Watchlist?

PPL's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering PPL for a spot on your watchlist. You still need to take note of risks, for example - PPL has 3 warning signs (and 1 which is significant) we think you should know about.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.