I Ran A Stock Scan For Earnings Growth And Clime Investment Management (ASX:CIW) Passed With Ease
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Clime Investment Management (ASX:CIW). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for Clime Investment Management
Clime Investment Management's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Impressively, Clime Investment Management has grown EPS by 17% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
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. Clime Investment Management maintained stable EBIT margins over the last year, all while growing revenue 32% to AU$16m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Clime Investment Management isn't a huge company, given its market capitalization of AU$44m. That makes it extra important to check on its balance sheet strength.
Are Clime Investment Management Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We note that Clime Investment Management insiders spent AU$171k on stock, over the last year; in contrast, we didn't see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. Zooming in, we can see that the biggest insider purchase was by Founder & Non-Independent Executive Chairman John Abernethy for AU$33k worth of shares, at about AU$0.65 per share.
Should You Add Clime Investment Management To Your Watchlist?
You can't deny that Clime Investment Management has grown its earnings per share at a very impressive rate. That's attractive. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. To put it succinctly; Clime Investment Management is a strong candidate for your watchlist. We don't want to rain on the parade too much, but we did also find 5 warning signs for Clime Investment Management (1 is a bit concerning!) that you need to be mindful of.
As a growth investor I do like to see insider buying. But Clime Investment Management 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.
