Yahoo Finance If EPS Growth Is Important To You, CES Energy Solutions (TSE:CEU) Presents An Opportunity
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like CES Energy Solutions (TSE:CEU). 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.
Check out our latest analysis for CES Energy Solutions
How Fast Is CES Energy Solutions Growing Its Earnings Per Share?
In the last three years CES Energy Solutions' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Outstandingly, CES Energy Solutions' EPS shot from CA$0.31 to CA$0.61, over the last year. Year on year growth of 96% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.
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. CES Energy Solutions maintained stable EBIT margins over the last year, all while growing revenue 26% to CA$2.2b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for CES Energy Solutions?
Are CES Energy Solutions 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 CES Energy Solutions insiders have a significant amount of capital invested in the stock. To be specific, they have CA$33m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 4.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Should You Add CES Energy Solutions To Your Watchlist?
CES Energy Solutions' earnings per share have been soaring, with growth rates sky high. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So at the surface level, CES Energy Solutions is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Still, you should learn about the 3 warning signs we've spotted with CES Energy Solutions.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
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.
