Yahoo Finance Should You Be Adding Chesapeake Utilities (NYSE:CPK) To Your Watchlist Today?
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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Chesapeake Utilities (NYSE:CPK). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Chesapeake Utilities
Chesapeake Utilities' 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Chesapeake Utilities grew its EPS by 11% per year. That's a good rate of growth, if it can be sustained.
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. While we note Chesapeake Utilities achieved similar EBIT margins to last year, revenue grew by a solid 19% to US$681m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Chesapeake Utilities' future profits.
Are Chesapeake Utilities Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The good news for Chesapeake Utilities shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Independent Director Lila Jaber bought US$50k worth of shares at an average price of around US$118. It seems that at least one insider is prepared to show the market there is potential within Chesapeake Utilities.
On top of the insider buying, it's good to see that Chesapeake Utilities insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at US$54m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Chesapeake Utilities' CEO, Jeff Householder, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between US$1.0b and US$3.2b, like Chesapeake Utilities, the median CEO pay is around US$5.3m.
The Chesapeake Utilities CEO received US$2.8m in compensation for the year ending December 2021. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Chesapeake Utilities Deserve A Spot On Your Watchlist?
As previously touched on, Chesapeake Utilities is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. However, before you get too excited we've discovered 2 warning signs for Chesapeake Utilities (1 shouldn't be ignored!) that you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Chesapeake Utilities, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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