Here’s why Terex (NYSE:TEX) has caught investors’ attention

The excitement of investing in a company that can turn around its fortunes is a major attraction for some speculators, so even companies that have no revenues, no profits and a history of failure can successfully find investors. But the reality is that when a company loses money every year, and for long enough, its investors usually take on their share of those losses. Loss-making companies are always racing against time to reach financial viability, so investors in these companies may take on more risk than they should.

Despite being in the age of open-air investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like Terex (NYSE:TEX). While this doesn’t necessarily mean it’s undervalued, the company’s profitability is enough to warrant some appreciation, especially if it’s growing.

See our latest analysis for Terex

How fast is Terex growing its earnings per share?

Over the past three years, Terex has grown its earnings per share (EPS) at such an impressive rate from a relatively low point, resulting in a three-year percentage growth rate that is unrivaled. not particularly representative of expected future performance. It therefore makes sense to focus instead on more recent growth rates. Terex’s EPS went from US$5.26 to US$7.66 in just one year; a result that is sure to make shareholders smile. That’s a fantastic gain of 45%.

One way to check a company’s growth is to look at how its revenue and earnings before interest and tax (EBIT) margins are changing. Terex’s EBIT margins have remained virtually unchanged over the last year, but the company should be happy to report revenue growth for the period of 12%, to US$5.2 billion. This is encouraging news for the company!

The chart below shows how the company’s financial and top-line results have changed over time. To see the actual numbers, click on the chart.

Of course, the trick is to find stocks that have their best days in the future, not the past. You can of course base your opinion on past performance, but you can also check out this interactive graph of professional analyst EPS forecasts for Terex.

Are Terex insiders aligned with all shareholders?

This should give investors a feeling of security in owning shares in a company if insiders also own shares, creating a close alignment of their interests. Terex fans will be reassured to know that insiders have significant capital that aligns their best interests with those of the broader shareholder group. Owning $95 million worth of stock in the company is no joke and insiders will be committed to delivering the best results for shareholders. This would indicate that the objectives of shareholders and management are the same.

It’s good to see insiders invested in the company, but are the compensation levels reasonable? Well, based on the CEO’s salary, you’d say that’s indeed the case. The median total compensation for CEOs of companies similar in size to Terex, with market caps between $2.0 billion and $6.4 billion, is about $6.8 million.

The Terex CEO took home a total compensation package of US$2.5 million in the year to December 2023. First impressions seem to point to a shareholder-friendly compensation policy. CEO compensation isn’t the most important aspect to consider in a company, but when it’s reasonable, it gives a little more confidence that executives are looking out for shareholders’ interests. It can also be a sign of good governance, more generally.

Does Terex deserve a spot on your watchlist?

If you believe that share price follows earnings per share, you should definitely dig deeper into Terex’s strong EPS growth. If you need more convincing beyond that EPS growth rate, don’t forget the reasonable compensation and high insider ownership. The overarching message here is that Terex has underlying strengths worth examining. Please note, however, that Terex displays 2 warning signs in our investment analysis and 1 of them is a bit unpleasant…

While opting for stocks without earnings growth and insider buying can yield results, for investors who value these key metrics, here is a carefully selected list of companies in the United States with promising growth potential and a privileged trust.

Please note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.