Does Cowen (NASDAQ:COWN) Deserve A Spot On Your Watchlist?
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Cowen (NASDAQ:COWN). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
See our latest analysis for Cowen
Cowen's Improving Profits
Over the last three years, Cowen has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, Cowen's EPS soared from US$7.54 to US$10.52, in just one year. That's a impressive gain of 39%. We should also note that the company has boosted EPS by buying back shares, showing the strength of its balance sheet.
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. Not all of Cowen's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Cowen's EBIT margins were flat over the last year, revenue grew by a solid 21% to US$1.9b. That's a real positive.
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Cowen EPS 100% free.
Are Cowen Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The good news is that Cowen insiders spent a whopping US$1.5m on stock in just one year, and I didn't see any selling. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the Independent Director, Lorence Kim, who made the biggest single acquisition, paying US$901k for shares at about US$30.03 each.
On top of the insider buying, it's good to see that Cowen insiders have a valuable investment in the business. To be specific, they have US$33m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 5.2% of the company; visible skin in the game.
Does Cowen Deserve A Spot On Your Watchlist?
For growth investors like me, Cowen's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. Still, you should learn about the 4 warning signs we've spotted with Cowen (including 1 which is a bit concerning) .
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Cowen, 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.
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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.
