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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Loews (NYSE:L). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Loews with the means to add long-term value to shareholders.

How Quickly Is Loews Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Loews has grown EPS by 17% per year. That's a pretty good rate, if the company can sustain it.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It's noted that Loews' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Loews shareholders can take confidence from the fact that EBIT margins are up from 10% to 15%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Loews Insiders Aligned With All Shareholders?

Since Loews has a market capitalisation of US$16b, 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 have a considerable amount of wealth invested in it, currently valued at US$2.8b. Coming in at 17% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

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. Our analysis has discovered that the median total compensation for the CEOs of companies like Loews, with market caps over US$8.0b, is about US$14m.

Loews' CEO took home a total compensation package worth US$6.9m in the year leading up to 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. It can also be a sign of a culture of integrity, in a broader sense.

Is Loews Worth Keeping An Eye On?

One important encouraging feature of Loews is that it is growing profits. The growth of EPS may be the eye-catching headline for Loews, but there's more to bring joy for shareholders. Boasting both modest CEO pay and considerable insider ownership, you'd argue this one is worthy of the watchlist, at least. Even so, be aware that Loews is showing 1 warning sign in our investment analysis , you should know about...

Although Loews 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.