If EPS Growth Is Important To You, Carriage Services (NYSE:CSV) Presents An Opportunity
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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Carriage Services (NYSE:CSV). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for Carriage Services
Carriage Services' Improving Profits
In the last three years Carriage Services' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Carriage Services' EPS grew from US$1.58 to US$3.16, over the previous 12 months. Year on year growth of 100% is certainly a sight to behold.
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. It's noted that Carriage Services' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Carriage Services' EBIT margins have fallen over the last twelve months, but the flat revenue sends a message of stability. While some people may not be too phased, this could be a sticking point for some investors.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Carriage Services' future EPS 100% free.
Are Carriage Services Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.
While Carriage Services insiders did net US$71k selling stock over the last year, they invested US$459k, a much higher figure. You could argue that level of buying implies genuine confidence in the business. We also note that it was the company insider, Carl Brink, who made the biggest single acquisition, paying US$103k for shares at about US$25.85 each.
On top of the insider buying, it's good to see that Carriage Services insiders have a valuable investment in the business. Holding US$55m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 11% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
Is Carriage Services Worth Keeping An Eye On?
Carriage Services' earnings per share growth have been climbing higher at an appreciable rate. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Carriage Services belongs near the top of your watchlist. However, before you get too excited we've discovered 1 warning sign for Carriage Services 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 Carriage Services, 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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