Yahoo Finance Do Tradeweb Markets' (NASDAQ:TW) Earnings Warrant Your Attention?
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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like Tradeweb Markets (NASDAQ:TW), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Tradeweb Markets
How Quickly Is Tradeweb Markets Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Tradeweb Markets has managed to grow EPS by 25% per year over three years. As a result, we can understand why the stock trades on a high multiple of trailing twelve month earnings.
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. It's noted that Tradeweb Markets' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Tradeweb Markets maintained stable EBIT margins over the last year, all while growing revenue 7.6% to US$1.3b. That's progress.
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.
Fortunately, we've got access to analyst forecasts of Tradeweb Markets' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Tradeweb Markets Insiders Aligned With All Shareholders?
Owing to the size of Tradeweb Markets, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. As a matter of fact, their holding is valued at US$12m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.06%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. Our analysis has discovered that the median total compensation for the CEOs of companies like Tradeweb Markets, with market caps over US$8.0b, is about US$12m.
The Tradeweb Markets CEO received US$10m in compensation for the year ending December 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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 Tradeweb Markets Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into Tradeweb Markets' strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. Everyone has their own preferences when it comes to investing but it definitely makes Tradeweb Markets look rather interesting indeed. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Tradeweb Markets' ROE with industry peers (and the market at large).
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
