Yahoo Finance I Ran A Stock Scan For Earnings Growth And Capitol Health (ASX:CAJ) Passed With Ease
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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In contrast to all that, I prefer to spend time on companies like Capitol Health (ASX:CAJ), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
See our latest analysis for Capitol Health
How Fast Is Capitol Health 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). That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Capitol Health's EPS has grown 35% 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.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Capitol Health is growing revenues, and EBIT margins improved by 4.3 percentage points to 11%, over the last year. That's great to see, on both counts.
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.
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 Capitol Health?
Are Capitol Health 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. So it is good to see that Capitol Health insiders have a significant amount of capital invested in the stock. Indeed, they hold AU$24m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 6.2% of the company; visible skin in the game.
Is Capitol Health Worth Keeping An Eye On?
You can't deny that Capitol Health has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. What about risks? Every company has them, and we've spotted 2 warning signs for Capitol Health you should know about.
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.
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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