For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
In contrast to all that, many investors prefer to focus on companies like Laureate Education (NASDAQ:LAUR), 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 Laureate Education with the means to add long-term value to shareholders.
Laureate Education's Improving Profits
In the last three years Laureate Education's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Laureate Education's EPS catapulted from US$0.75 to US$1.98, over the last year. It's not often a company can achieve year-on-year growth of 166%.
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. EBIT margins for Laureate Education remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 5.5% to US$1.6b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
See our latest analysis for Laureate Education
Fortunately, we've got access to analyst forecasts of Laureate Education's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Laureate Education Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Laureate Education shares worth a considerable sum. Indeed, they hold US$37m worth of its stock. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 1.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
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. The median total compensation for CEOs of companies similar in size to Laureate Education, with market caps between US$2.0b and US$6.4b, is around US$7.6m.
The Laureate Education CEO received US$5.0m in compensation for the year ending December 2024. That is actually below the median for CEO's of similarly 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Laureate Education Deserve A Spot On Your Watchlist?
Laureate Education's earnings per share have been soaring, with growth rates sky high. 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. Laureate Education certainly ticks a few boxes, so we think it's probably well worth further consideration. Now, you could try to make up your mind on Laureate Education by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Although Laureate Education certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.
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.