Yahoo Finance Do Light & Wonder's (NASDAQ:LNW) Earnings Warrant Your Attention?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Light & Wonder (NASDAQ:LNW), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Light & Wonder with the means to add long-term value to shareholders.
View our latest analysis for Light & Wonder
Light & Wonder's Improving Profits
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for Light & Wonder to have grown EPS from US$0.50 to US$3.45 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future.
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. The good news is that Light & Wonder is growing revenues, and EBIT margins improved by 5.9 percentage points to 25%, over the last year. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Light & Wonder.
Are Light & Wonder Insiders Aligned With All Shareholders?
Since Light & Wonder has a market capitalisation of US$8.9b, 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 hold US$49m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
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. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like Light & Wonder with market caps between US$4.0b and US$12b is about US$8.5m.
The Light & Wonder CEO received US$6.7m in compensation for the year ending December 2023. 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 a culture of integrity, in a broader sense.
Should You Add Light & Wonder To Your Watchlist?
Light & Wonder's earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The strong EPS improvement suggests the businesses is humming along. Light & Wonder certainly ticks a few boxes, so we think it's probably well worth further consideration. We don't want to rain on the parade too much, but we did also find 2 warning signs for Light & Wonder (1 is a bit unpleasant!) that you need to be mindful of.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
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.
