Here's Why We Think CML Microsystems (LON:CML) Is Well Worth Watching
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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like CML Microsystems (LON:CML). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for CML Microsystems
CML Microsystems' Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that CML Microsystems has grown EPS by 57% per year, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. The good news is that CML Microsystems is growing revenues, and EBIT margins improved by 6.3 percentage points to 14%, over the last year. Both of which are great metrics to check off for potential growth.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for CML Microsystems?
Are CML Microsystems Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We haven't seen any insiders selling CML Microsystems shares, in the last year. With that in mind, it's heartening that Geoff Barnes, the Senior Independent Non-Executive Director of the company, paid UK£29k for shares at around UK£5.77 each. It seems that at least one insider is prepared to show the market there is potential within CML Microsystems.
Along with the insider buying, another encouraging sign for CML Microsystems is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at UK£17m. This considerable investment should help drive long-term value in the business. Those holdings account for over 26% of the company; visible skin in the game.
Is CML Microsystems Worth Keeping An Eye On?
CML Microsystems' earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe CML Microsystems deserves timely attention. Still, you should learn about the 4 warning signs we've spotted with CML Microsystems (including 1 which is significant).
The good news is that CML Microsystems is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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.
