If EPS Growth Is Important To You, StealthGas (NASDAQ:GASS) Presents An Opportunity
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
In contrast to all that, many investors prefer to focus on companies like StealthGas (NASDAQ:GASS), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for StealthGas
How Fast Is StealthGas Growing Its Earnings Per Share?
In the last three years StealthGas' 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. To the delight of shareholders, StealthGas' EPS soared from US$0.90 to US$1.47, over the last year. That's a impressive gain of 64%.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. StealthGas' EBIT margins have actually improved by 4.8 percentage points in the last year, to reach 29%, but, on the flip side, revenue was down 6.0%. That falls short of ideal.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Since StealthGas is no giant, with a market capitalisation of US$231m, you should definitely check its cash and debt before getting too excited about its prospects.
Are StealthGas 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. So it is good to see that StealthGas insiders have a significant amount of capital invested in the stock. Holding US$68m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. That holding amounts to 30% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.
Does StealthGas Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into StealthGas' strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. You still need to take note of risks, for example - StealthGas has 1 warning sign we think you should be aware of.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
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.
