That's why Texas Pacific Land (NYSE:TPL) has caught investors' attention

The excitement of investing in a company that can turn its fortunes around is a big draw for some speculators, so even companies that have no revenue, no profit, and a long track record can find investors. Sometimes such stories can cloud investors' minds and cause them to invest based on their emotions rather than good company fundamentals. A loss-making company has yet to prove itself with profits, and at some point the inflow of outside capital may dry up.

Although we are in the era of high-sky investing in technology stocks, many investors still follow a more traditional strategy. They buy shares of profitable companies such as Texas Pacific Country (NYSE:TPL). Even if this company is fairly valued by the market, investors would agree that Texas Pacific Land still has the opportunity to increase long-term value for shareholders by generating consistent earnings.

Check out our latest analysis for Texas Pacific Land

Texas Pacific Land’s earnings per share rise

In the short term, the market is a voting machine, but in the long term, it's a weighing machine, so you'd expect the share price to eventually follow earnings per share (EPS). This means that EPS growth is viewed as a real positive by most successful long-term investors. It's certainly nice to see that Texas Pacific Land has managed to grow earnings per share by 32% per year over three years. If this growth continues into the future, shareholders will have every reason to cheer.

One way to check a company's growth is to look at how its revenue and earnings before interest and tax (EBIT) are changing. Texas Pacific Land managed to keep its EBIT margins stable last year while growing revenue by 3.1% to $671 million. This is encouraging news for the company!

The chart below shows how the company's profit and revenue have changed over time. Click on the chart to see the exact numbers.

While rising earnings are always good, you should always remember that a weak balance sheet can backfire, so check Texas Pacific Land's balance sheet strength before you get too excited.

Are Texas Pacific Land insiders on the same page as all shareholders?

Insider interest in a company always generates some interest, and many investors look for companies where insiders walk the talk. Often, buying shares is a sign that the buyer thinks they are undervalued. However, insiders are sometimes wrong, and we don't know the exact reasoning behind their purchases.

We note that insiders have sold $185,000 worth of shares in the last year. However, that's far less than the $1.1 million insiders have spent buying shares. This increases interest in Texas Pacific Land because it suggests that those who understand the company best are bullish. We also note that it was independent director Robert Roosa who made the largest single acquisition, paying $492,000 for shares at about $550 each.

In addition to insider purchases, another encouraging sign for Texas Pacific Land is that insiders as a group hold a significant stake in the company. In fact, they hold $23 million worth of shares. This shows a significant stake and could indicate conviction in the business strategy. Although this investment represents only 0.1% of the company, the value is enough to show that insiders have invested heavily in the company.

Insiders already own a significant number of shares and are buying more, but the good news for ordinary shareholders doesn't end there. Texas Pacific Land CEO Tyler Glover receives a relatively modest salary compared to other CEOs of companies of this size. The average total compensation for CEOs of companies similar in size to Texas Pacific Land with a market capitalization of over $8.0 billion is around $13 million.

Texas Pacific Land's CEO received a total compensation package of $6.1 million in the year leading up to December 2023. This is clearly well below average, so this arrangement seems generous to shareholders at first glance and suggests a modest compensation culture. While the level of CEO compensation should not be the most important factor in how the company is perceived, modest compensation is positive because it suggests that the board has shareholders' interests in mind. It can also be a sign of good corporate governance in general.

Does Texas Pacific Land deserve a spot on your watchlist?

For growth investors, Texas Pacific Land's pure earnings growth rate is a bright spot in the night. In addition, we can see that insiders own a lot of the company's shares and are buying more, so it's fair to say this stock deserves a spot on your watchlist. Of course, just because Texas Pacific Land is growing doesn't mean it's undervalued. If you're wondering about the valuation, check out this indicator of its price-to-earnings ratio compared to the industry.

Attentive growth investors like to see insider activity. Fortunately, Texas Pacific Land is not the only company. You can see a curated list of companies that demonstrate consistent growth and high insider ownership.

Please note that the insider transactions discussed in this article are reportable transactions in the respective jurisdiction.

Do you have feedback on this article? Are you concerned about the content? Contact us directly from us. Alternatively, send an email to editorial-team (at) simplywallst.com.

This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.