Yahoo Finance We Ran A Stock Scan For Earnings Growth And InterDigital (NASDAQ:IDCC) Passed With Ease
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. 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 InterDigital (NASDAQ:IDCC), 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 InterDigital with the means to add long-term value to shareholders.
Check out our latest analysis for InterDigital
How Fast Is InterDigital Growing Its Earnings Per Share?
In the last three years InterDigital'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. As a result, we'll zoom in on growth over the last year, instead. InterDigital boosted its trailing twelve month EPS from US$6.11 to US$7.55, in the last year. That's a 24% gain; respectable growth in the broader scheme of things.
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. On the revenue front, InterDigital has done well over the past year, growing revenue by 9.3% to US$611m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of InterDigital's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are InterDigital 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 InterDigital shares worth a considerable sum. With a whopping US$61m worth of shares as a group, insiders have plenty riding on the company's success. This would indicate that the goals of shareholders and management are one and the same.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between US$2.0b and US$6.4b, like InterDigital, the median CEO pay is around US$6.7m.
The InterDigital CEO received US$4.8m in compensation for the year ending December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does InterDigital Deserve A Spot On Your Watchlist?
One positive for InterDigital is that it is growing EPS. That's nice to see. Earnings growth might be the main attraction for InterDigital, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. It is worth noting though that we have found 1 warning sign for InterDigital that you need to take into consideration.
Although InterDigital 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
