The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies with no revenue, no profit, and a history of failure can successfully find investors. Sometimes these stories can cloud investors’ minds, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies can act as a sponge for capital – so investors should be careful not to throw good money after bad.
Contrary to all this, many investors prefer to focus on companies like Republic Services (NYSE:RSG), which not only generates revenue, but also profits. This does not mean that the company presents the best investment opportunity, but profitability is a key element of business success.
See our latest review for Republic Services
How fast is Republic Services growing earnings per share?
Typically, companies experiencing earnings per share (EPS) growth should see similar stock price trends. This means EPS growth is seen as a real benefit by most successful long-term investors. We can see that over the past three years, Republic Services has increased its EPS by 10% per year. That’s a pretty good rate, if the company can maintain it.
One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. Republic Services’ EBIT margins have remained virtually unchanged over the past year, but the company should be pleased to report revenue growth for the period of 14% to $12 billion. This is encouraging news for the company!
The chart below shows how the company’s top and bottom line has grown over time. For more details, click on the image.
In investing, as in life, the future matters more than the past. So why not check this out free interactive visualization of Republic Services’ provide profits?
Are Republic Services insiders aligned with all shareholders?
We wouldn’t expect to see insiders owning a large percentage of a $41 billion company like Republic Services. But thanks to their investment in the company, it’s nice to see that there are still incentives to align their actions with those of shareholders. Indeed, they hold for 50 million dollars of its shares. This considerable investment should contribute to generating long-term value in the company. Even though that’s only about 0.1% of the company, it’s enough money to indicate alignment between company executives and common stockholders.
It’s good to see that insiders are invested in the company, but are the compensation levels reasonable? Our quick analysis of CEO compensation seems to indicate that they are. Our analysis found that the median total compensation for CEOs of companies like Republic Services, with market caps above $8.0 billion, is around $13 million.
The CEO of Republic Services received $7.9 million in compensation for the year ending December 2021. That seems pretty reasonable, especially since it’s below the median for similarly sized companies. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives a little more confidence that executives are looking after shareholders’ interests. It can also be a sign of good governance more generally.
Should you add Republic services to your watch list?
As mentioned earlier, Republic Services is a growing company, which is encouraging. EPS Growth may be Republic Services’ catchy headline, but there’s more to shareholders to cheer about. Boasting both a modest CEO salary and considerable insider ownership, you’d say this one deserves at least the watch list. What about the risks? Every business has them, and we’ve spotted 1 warning sign for the services of the Republic you should know.
The beauty of investing is that you can invest in almost any business you want. But if you’d rather focus on stocks that have been insider buying, here’s a list of companies that have been insider buying over the past three months.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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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.