Yahoo Finance If EPS Growth Is Important To You, California Nanotechnologies (CVE:CNO) Presents An Opportunity
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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like California Nanotechnologies (CVE:CNO). 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 California Nanotechnologies
California Nanotechnologies' Improving Profits
Over the last three years, California Nanotechnologies has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. California Nanotechnologies' EPS shot up from US$0.011 to US$0.017; a result that's bound to keep shareholders happy. That's a commendable gain of 58%.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. On the one hand, California Nanotechnologies' EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.
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 California Nanotechnologies is no giant, with a market capitalisation of CA$11m, you should definitely check its cash and debt before getting too excited about its prospects.
Are California Nanotechnologies Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Shareholders in California Nanotechnologies will be more than happy to see insiders committing themselves to the company, spending US$448k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was CEO & Director Eric Eyerman who made the biggest single purchase, worth CA$333k, paying CA$0.15 per share.
Does California Nanotechnologies Deserve A Spot On Your Watchlist?
For growth investors, California Nanotechnologies' raw rate of earnings growth is a beacon in the night. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. So on this analysis, California Nanotechnologies is probably worth spending some time on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with California Nanotechnologies (at least 2 which are a bit concerning) , and understanding these should be part of your investment process.
The good news is that California Nanotechnologies is not the only growth stock with insider buying. Here's a list of growth-focused companies in CA with insider buying in the last three months!
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.
