Yahoo Finance Do Escalade's (NASDAQ:ESCA) Earnings Warrant Your Attention?
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.
So if you're like me, you might be more interested in profitable, growing companies, like Escalade (NASDAQ:ESCA). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
See our latest analysis for Escalade
Escalade's Improving Profits
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that Escalade's EPS have grown from US$1.65 to US$1.83 over twelve months. That's a 11% gain; respectable growth in the broader scheme of things.
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. While we note Escalade's EBIT margins were flat over the last year, revenue grew by a solid 28% to US$315m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since Escalade is no giant, with a market capitalization of US$263m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Escalade Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.
Insider selling of Escalade shares was insignificant compared to the one buyer, over the last twelve months. Specifically the Chairman of the Board, Walter Glazer, spent US$388k, paying about US$18.59 per share. To me, that's probably a sign of conviction.
On top of the insider buying, it's good to see that Escalade insiders have a valuable investment in the business. With a whopping US$69m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 26% of the stock on issue, thus making insiders influential, and aligned, owners of the business.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Walt Glazer is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Escalade with market caps between US$100m and US$400m is about US$1.1m.
The Escalade CEO received total compensation of just US$130k in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Escalade To Your Watchlist?
One positive for Escalade is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Escalade , and understanding it should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Escalade, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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