Here's Why We Think Excelsior Capital (ASX:ECL) 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Excelsior Capital (ASX:ECL). 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 Excelsior Capital
How Quickly Is Excelsior Capital Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Excelsior Capital's EPS has grown 25% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. While we note Excelsior Capital achieved similar EBIT margins to last year, revenue grew by a solid 24% to AU$93m. That's encouraging news for the company!
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.
Since Excelsior Capital is no giant, with a market capitalisation of AU$61m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Excelsior Capital Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We haven't seen any insiders selling Excelsior Capital shares, in the last year. Add in the fact that Peter E. Murray, the company insider of the company, paid AU$13k for shares at around AU$1.66 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Excelsior Capital.
On top of the insider buying, we can also see that Excelsior Capital insiders own a large chunk of the company. To be exact, company insiders hold 60% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have AU$36m invested in the business, at the current share price. That should be more than enough to keep them focussed on creating shareholder value!
Should You Add Excelsior Capital To Your Watchlist?
You can't deny that Excelsior Capital has grown its earnings per share at a very impressive rate. That's attractive. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. These things considered, this is one stock worth watching. We don't want to rain on the parade too much, but we did also find 2 warning signs for Excelsior Capital that you need to be mindful of.
Keen growth investors love to see insider buying. Thankfully, Excelsior Capital isn't the only one. You can see a a free list of them here.
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.
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