If You Like EPS Growth Then Check Out Citi Trends (NASDAQ:CTRN) Before It's Too Late
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Citi Trends (NASDAQ:CTRN). 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
Check out our latest analysis for Citi Trends
How Fast Is Citi Trends Growing Its Earnings Per Share?
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Citi Trends grew its EPS from US$0.65 to US$7.68, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
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. Citi Trends shareholders can take confidence from the fact that EBIT margins are up from 1.2% to 9.1%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
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 Citi Trends?
Are Citi Trends 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 Citi Trends insiders have a significant amount of capital invested in the stock. Indeed, they hold US$31m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 4.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Is Citi Trends Worth Keeping An Eye On?
Citi Trends's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Citi Trends for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for Citi Trends (1 is a bit unpleasant!) that you need to be mindful of.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
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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