Here's Why We Think Titan Machinery (NASDAQ:TITN) Might Deserve Your Attention Today
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Titan Machinery (NASDAQ:TITN), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for Titan Machinery
How Fast Is Titan Machinery Growing Its Earnings Per Share?
In the last three years Titan Machinery's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Titan Machinery's EPS shot up from US$2.93 to US$4.49; a result that's bound to keep shareholders happy. That's a commendable gain of 54%.
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. Titan Machinery maintained stable EBIT margins over the last year, all while growing revenue 29% to US$2.2b. That's encouraging news for the company!
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 Titan Machinery?
Are Titan Machinery 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. 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.
Titan Machinery top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Lead Independent Director, Stan Erickson, paid US$89k to buy shares at an average price of US$29.67. Strong buying like that could be a sign of opportunity.
On top of the insider buying, it's good to see that Titan Machinery insiders have a valuable investment in the business. Given insiders own a significant chunk of shares, currently valued at US$83m, they have plenty of motivation to push the business to succeed. At 11% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Titan Machinery's CEO, David Meyer, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Titan Machinery with market caps between US$400m and US$1.6b is about US$3.6m.
The CEO of Titan Machinery only received US$487k in total compensation for the year ending January 2023. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Titan Machinery Worth Keeping An Eye On?
You can't deny that Titan Machinery has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. It is worth noting though that we have found 1 warning sign for Titan Machinery that you need to take into consideration.
Keen growth investors love to see insider buying. Thankfully, Titan Machinery 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.
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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