Should You Be Adding Broadridge Financial Solutions (NYSE:BR) To Your Watchlist Today?
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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Broadridge Financial Solutions (NYSE:BR), 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.
View our latest analysis for Broadridge Financial Solutions
Broadridge Financial Solutions' Improving Profits
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Broadridge Financial Solutions has grown its trailing twelve month EPS from US$4.48 to US$4.70, in the last year. That's a fair increase of 5.1%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Broadridge Financial Solutions maintained stable EBIT margins over the last year, all while growing revenue 14% to US$5.5b. That's encouraging news for the company!
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Broadridge Financial Solutions' forecast profits?
Are Broadridge Financial Solutions Insiders Aligned With All Shareholders?
Owing to the size of Broadridge Financial Solutions, we wouldn't expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$109m. While that is a lot of skin in the game, we note this holding only totals to 0.6% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations over US$8.0b, like Broadridge Financial Solutions, the median CEO pay is around US$13m.
Broadridge Financial Solutions' CEO took home a total compensation package worth US$10m in the year leading up to June 2021. That is actually below the median for CEO's of similarly 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 good governance, more generally.
Should You Add Broadridge Financial Solutions To Your Watchlist?
As previously touched on, Broadridge Financial Solutions is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for Broadridge Financial Solutions, but the pleasant picture gets better than that. With company insiders aligning themselves considerably with the company's success and modest CEO compensation, there's no arguments that this is a stock worth looking into. Before you take the next step you should know about the 1 warning sign for Broadridge Financial Solutions that we have uncovered.
Although Broadridge Financial Solutions 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.
