Does Clearwater Paper (NYSE:CLW) Deserve A Spot On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.
In contrast to all that, many investors prefer to focus on companies like Clearwater Paper (NYSE:CLW), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Clearwater Paper with the means to add long-term value to shareholders.
See our latest analysis for Clearwater Paper
How Quickly Is Clearwater Paper Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Clearwater Paper grew its EPS by 12% per year. That's a good rate of growth, if it can be sustained.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. This approach makes Clearwater Paper look pretty good, on balance; although revenue is flattish, EBIT margins improved from 5.6% to 8.7% in the last year. Which is a great look for the company.
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.
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Clearwater Paper's balance sheet strength, before getting too excited.
Are Clearwater Paper Insiders Aligned With All Shareholders?
It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own Clearwater Paper shares worth a considerable sum. To be specific, they have US$15m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 2.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Does Clearwater Paper Deserve A Spot On Your Watchlist?
One positive for Clearwater Paper is that it is growing EPS. That's nice to see. To add an extra spark to the fire, significant insider ownership in the company is another highlight. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Clearwater Paper , and understanding this should be part of your investment process.
Although Clearwater Paper certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..
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.
