UK markets close in 1 hour 24 minutes
  • FTSE 100

    7,357.78
    +99.46 (+1.37%)
     
  • FTSE 250

    19,438.34
    +119.39 (+0.62%)
     
  • AIM

    911.16
    +7.67 (+0.85%)
     
  • GBP/EUR

    1.1603
    +0.0018 (+0.15%)
     
  • GBP/USD

    1.2211
    -0.0059 (-0.48%)
     
  • BTC-GBP

    17,245.06
    +204.21 (+1.20%)
     
  • CMC Crypto 200

    460.52
    +10.46 (+2.32%)
     
  • S&P 500

    3,921.65
    +21.54 (+0.55%)
     
  • DOW

    31,671.69
    +233.43 (+0.74%)
     
  • CRUDE OIL

    110.64
    +1.07 (+0.98%)
     
  • GOLD FUTURES

    1,822.20
    -2.60 (-0.14%)
     
  • NIKKEI 225

    27,049.47
    +178.20 (+0.66%)
     
  • HANG SENG

    22,418.97
    +189.45 (+0.85%)
     
  • DAX

    13,346.40
    +160.33 (+1.22%)
     
  • CAC 40

    6,137.04
    +89.73 (+1.48%)
     

With EPS Growth And More, Cake Box Holdings (LON:CBOX) Is Interesting

  • Oops!
    Something went wrong.
    Please try again later.
·4-min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Cake Box Holdings (LON:CBOX). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Cake Box Holdings

Cake Box Holdings'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). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. As a tree reaches steadily for the sky, Cake Box Holdings's EPS has grown 24% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. Cake Box Holdings shareholders can take confidence from the fact that EBIT margins are up from 20% to 23%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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.

earnings-and-revenue-history
earnings-and-revenue-history

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Cake Box Holdings?

Are Cake Box Holdings Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Cake Box Holdings shares worth a considerable sum. Indeed, they hold UK£29m worth of its stock. That's a lot of money, and no small incentive to work hard. That amounts to 35% of the company, demonstrating a degree of high-level alignment with shareholders.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations under UK£160m, like Cake Box Holdings, the median CEO pay is around UK£244k.

Cake Box Holdings offered total compensation worth UK£191k to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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. I'd also argue reasonable pay levels attest to good decision making more generally.

Does Cake Box Holdings Deserve A Spot On Your Watchlist?

You can't deny that Cake Box Holdings 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. Each to their own, but I think all this makes Cake Box Holdings look rather interesting indeed. Still, you should learn about the 2 warning signs we've spotted with Cake Box Holdings .

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting