Here's Why We Think Consumer Portfolio Services (NASDAQ:CPSS) Might Deserve Your Attention Today
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 Consumer Portfolio Services (NASDAQ:CPSS). 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.
View our latest analysis for Consumer Portfolio Services
Consumer Portfolio Services' Improving Profits
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Consumer Portfolio Services grew its EPS from US$1.00 to US$3.79, in one short year. Even though that growth rate may not 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.
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. Not all of Consumer Portfolio Services' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Consumer Portfolio Services maintained stable EBIT margins over the last year, all while growing revenue 37% to US$248m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Since Consumer Portfolio Services is no giant, with a market capitalisation of US$122m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Consumer Portfolio Services Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Consumer Portfolio Services insiders have a significant amount of capital invested in the stock. To be specific, they have US$40m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 33% of the company; visible skin in the game.
Is Consumer Portfolio Services Worth Keeping An Eye On?
Consumer Portfolio Services' earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Consumer Portfolio Services for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Consumer Portfolio Services you should be aware of, and 1 of them is significant.
Although Consumer Portfolio Services certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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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