Here's Why We Think Concrete Pumping Holdings (NASDAQ:BBCP) Is Well Worth Watching
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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Concrete Pumping Holdings (NASDAQ:BBCP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Concrete Pumping Holdings with the means to add long-term value to shareholders.
See our latest analysis for Concrete Pumping Holdings
Concrete Pumping Holdings' Improving Profits
Concrete Pumping Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Concrete Pumping Holdings' EPS skyrocketed from US$0.39 to US$0.51, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 31%.
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. Concrete Pumping Holdings shareholders can take confidence from the fact that EBIT margins are up from 12% to 14%, and revenue is growing. 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. To see the actual numbers, click on the chart.
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 Concrete Pumping Holdings' future EPS 100% free.
Are Concrete Pumping Holdings 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. Concrete Pumping Holdings followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they hold US$30m worth of its stock. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 6.7% of the shares on issue for the business, an appreciable amount considering the market cap.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between US$200m and US$800m, like Concrete Pumping Holdings, the median CEO pay is around US$2.2m.
Concrete Pumping Holdings offered total compensation worth US$1.1m to its CEO in the year to October 2022. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Concrete Pumping Holdings Deserve A Spot On Your Watchlist?
For growth investors, Concrete Pumping Holdings' raw rate of earnings growth is a beacon in the night. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that Concrete Pumping Holdings has underlying strengths that make it worth a look at. You still need to take note of risks, for example - Concrete Pumping Holdings has 1 warning sign we think you should be aware of.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of companies which have demonstrated growth backed by recent insider purchases.
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.
