We Ran A Stock Scan For Earnings Growth And Celtic (LON:CCP) Passed With Ease
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. 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. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Celtic (LON:CCP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Celtic with the means to add long-term value to shareholders.
See our latest analysis for Celtic
How Fast Is Celtic Growing Its Earnings Per Share?
Celtic 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. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Celtic's EPS catapulted from UK£0.10 to UK£0.30, over the last year. It's not often a company can achieve year-on-year growth of 191%.
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. On the revenue front, Celtic has done well over the past year, growing revenue by 15% to UK£129m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Since Celtic is no giant, with a market capitalisation of UK£122m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Celtic Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in Celtic will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 58% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. To give you an idea, the value of insiders' holdings in the business are valued at UK£71m at the current share price. So there's plenty there to keep them focused!
Does Celtic Deserve A Spot On Your Watchlist?
Celtic's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering Celtic for a spot on your watchlist. We should say that we've discovered 2 warning signs for Celtic that you should be aware of before investing here.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in GB with promising growth potential and insider confidence.
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.
