Here's Why We Think Universal Technical Institute (NYSE:UTI) Is Well Worth Watching

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Universal Technical Institute (NYSE:UTI). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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How Quickly Is Universal Technical Institute 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Universal Technical Institute has grown EPS by 19% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Universal Technical Institute is growing revenues, and EBIT margins improved by 4.3 percentage points to 10.0%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Check out our latest analysis for Universal Technical Institute

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Universal Technical Institute's future EPS 100% free.

Are Universal Technical Institute 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. So it is good to see that Universal Technical Institute insiders have a significant amount of capital invested in the stock. Indeed, they hold US$48m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 2.7%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations between US$1.0b and US$3.2b, like Universal Technical Institute, the median CEO pay is around US$5.9m.

Universal Technical Institute's CEO took home a total compensation package worth US$3.5m in the year leading up to September 2024. That comes in below the average for similar sized companies and seems pretty reasonable. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does Universal Technical Institute Deserve A Spot On Your Watchlist?

You can't deny that Universal Technical Institute has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that Universal Technical Institute has underlying strengths that make it worth a look at. You still need to take note of risks, for example - Universal Technical Institute has 1 warning sign we think you should be aware of.

Although Universal Technical Institute 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.