Does SBA Communications (NASDAQ:SBAC) deserve a place on your watch list?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies with no revenue, no profit, and a history of failure can successfully find investors. But as Peter Lynch said in One Up on Wall Street, “Long shots almost never pay off.” Although a well-funded business may suffer losses for years, it will eventually have to turn a profit or investors will move on and the business will wither away.

Despite being in the era of astronomical investing in tech stocks, many investors still adopt a more traditional strategy; buy shares in profitable companies like SBA Communications (NASDAQ: SBAC). While profit isn’t the only metric to consider when investing, it’s worth recognizing companies that can consistently produce it.

Check out our latest analysis for SBA Communications

How fast is SBA Communications growing earnings per share?

Investors and investment funds seek profits, which means stock prices tend to rise with positive earnings per share (EPS). So, for many aspiring investors, improving EPS is seen as a good sign. It is an outstanding achievement for SBA Communications to have grown EPS from $1.26 to $4.06 in just one year. While sustaining growth at this level is difficult, it bodes well for the company’s future prospects.

One way to check a company’s growth is to look at the evolution of its revenues and its earnings before interest and taxes (EBIT) margins. Not all SBA Communications revenue this year is revenue operations, so keep in mind that the revenue and margin figures used in this article may not be the best representation of the underlying business. The music to the ears of SBA Communications shareholders is that EBIT margins have increased from 32% to 36% in the last 12 months and revenues are also on an upward trend. These are two great indicators to check for potential growth.

You can check the company’s revenue and profit growth trend in the table below. To see the actual numbers, click on the chart.

NasdaqGS: SBAC Earnings and Revenue History as of July 21, 2022

Luckily, we have access to analyst forecasts from SBA Communications coming profits. You can make your own predictions without looking, or you can take a peek at what the pros are predicting.

Are SBA Communications Insiders Aligned with All Shareholders?

Given that SBA Communications has a market capitalization of US$34 billion, we wouldn’t expect insiders to hold a high percentage of shares. But thanks to their investment in the company, it’s nice to see that there are still incentives to align their actions with shareholders. Notably, they hold an enviable stake in the company, worth US$422 million. This suggests that management will be very mindful of shareholder interests when making decisions!

While it’s always good to see strong belief in the company from insiders through heavy investment, it’s also important for shareholders to consider whether executive compensation policies are reasonable. Well, based on CEO compensation, you’d say they indeed are. Our analysis found that the median total compensation for CEOs of companies like SBA Communications, with market caps above $8.0 billion, is around $13 million.

The CEO of SBA Communications received $10.0 million in compensation for the year ending December 2021. That seems pretty reasonable, especially since it’s below the median for similarly sized companies. CEO pay levels aren’t the most important metric for investors, but when pay is modest, it promotes better alignment between the CEO and ordinary shareholders. It can also be a sign of good governance more generally.

Should you add SBA communications to your watch list?

SBA Communications’ earnings per share growth has increased at an appreciable pace. The sweetener is that the insiders have a mountain of stock and the CEO compensation is quite reasonable. The sharp rise in earnings could signal good business momentum. SBA Communications certainly ticks a few boxes, so we think it’s probably worth looking into further. It should be noted, however, that we found 3 warning signs for SBA Communications (2 are a little unpleasant!) that must be taken into consideration.

There is always the possibility of doing well by buying stocks that are not increased income and not have insiders buying stocks. But for those who consider these measures important, we encourage you to check out the companies that do have these characteristics. You can access a free list of them here.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

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 be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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