It’s only natural that many investors, especially those who are new to the game, prefer to buy shares in ‘sexy’ stocks with a good story, even if those businesses lose money.But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
So if you’re like me, you might be more interested in profitable, growing companies, like Upstart Holdings (NASDAQ:UPST).While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually.Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Upstart Holdings Growing Its Earnings Per Share? In the last three years Upstart Holdings’s earnings per share took off like a rocket; fast, and from a low base.
So the actual rate of growth doesn’t tell us much.As a result, I’ll zoom in on growth over the last year, instead.Like a firecracker arcing through the night sky, Upstart Holdings’s EPS shot from US$0.41 to US$0.93, over the last year.You don’t see 125% year-on-year growth like that, very often.
That could be a sign that the business has reached a true inflection point.
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.Not all of Upstart Holdings’s revenue this year is revenue from operations , so keep in mind the revenue and margin numbers I’ve used might not be the best representation of the underlying business.The good news is that Upstart Holdings is growing revenues, and EBIT margins improved by 7.8 percentage points to 15%, over the last year.Ticking those two boxes is a good sign of growth, in my book.
The chart below shows how the company’s bottom and top lines have progressed over time.
Click on the chart to see the exact numbers.
NasdaqGS:UPST Earnings and Revenue History December 28th 2021 In investing, as in life, the future matters more than the past.So why not check out this free interactive visualization of Upstart Holdings’s forecast profits ?
Are Upstart Holdings Insiders Aligned With All Shareholders? Since Upstart Holdings has a market capitalization of US$13b, 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 have a glittering mountain of wealth invested in it, currently valued at US$2.0b.
That equates to 15% of the company, making insiders powerful and aligned with other shareholders.So it might be my imagination, but I do sense the glimmer of an opportunity.
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly.A brief analysis of the CEO compensation suggests they are.I discovered that the median total compensation for the CEOs of companies like Upstart Holdings, with market caps over US$8.0b, is about US$11m.
Upstart Holdings offered total compensation worth US$8.8m to its CEO in the year to .That comes in below the average for similar sized companies, and seems pretty reasonable to me.
CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders.It can also be a sign of a culture of integrity, in a broader sense.
Is Upstart Holdings Worth Keeping An Eye On? Upstart Holdings’s earnings have taken off like any random crypto-currency did, back in 2017.The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable.The strong EPS improvement suggests the businesses is humming along.Big growth can make big winners, so I do think Upstart Holdings is worth considering carefully.We don’t want to rain on the parade too much, but we did also find 3 warning signs for Upstart Holdings that you need to be mindful of.
Although Upstart Holdings certainly looks good to me, I would like it more if insiders were buying up shares.If you like to see insider buying, too, then this free list of growing companies that insiders are buying , could be exactly what you’re looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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