Is Now The Time To Put Travel + Leisure (NYSE:TNL) On Your Watchlist?

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.

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 Travel + Leisure (NYSE:TNL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Travel + Leisure with the means to add long-term value to shareholders.

View our latest analysis for Travel + Leisure

Travel + Leisure’s Earnings Per Share Are Growing

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 makes EPS growth an attractive quality for any company. Travel + Leisure’s shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 50%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Travel + Leisure’s revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Travel + Leisure achieved similar EBIT margins to last year, revenue grew by a solid 4.3% to US$3.8b. That’s progress.

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 Travel + Leisure’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Travel + Leisure Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own Travel + Leisure 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. That’s certainly enough to let shareholders know that management will be very focussed on long term growth.

Does Travel + Leisure Deserve A Spot On Your Watchlist?

Travel + Leisure’s earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, Travel + Leisure is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We don’t want to rain on the parade too much, but we did also find 2 warning signs for Travel + Leisure (1 is potentially serious!) that you need to be mindful of.

Although Travel + Leisure 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.