Yahoo Finance LKQ (NASDAQ:LKQ) Ticks All The Boxes When It Comes To Earnings Growth
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in LKQ (NASDAQ:LKQ). 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 LKQ
LKQ's Earnings Per Share Are Growing
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that LKQ has managed to grow EPS by 35% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While LKQ may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for LKQ?
Are LKQ Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$15b company like LKQ. But we do take comfort from the fact that they are investors in the company. Holding US$85m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to LKQ, with market caps over US$8.0b, is around US$13m.
The LKQ CEO received US$11m in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Is LKQ Worth Keeping An Eye On?
You can't deny that LKQ has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the key takeaway is that LKQ is worth keeping an eye on. You should always think about risks though. Case in point, we've spotted 3 warning signs for LKQ you should be aware of.
Although LKQ certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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