Yahoo Finance Here's Why Optex Systems Holdings (NASDAQ:OPXS) Has Caught The Eye Of Investors
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Optex Systems Holdings (NASDAQ:OPXS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Optex Systems Holdings with the means to add long-term value to shareholders.
See our latest analysis for Optex Systems Holdings
How Fast Is Optex Systems Holdings Growing Its Earnings Per Share?
Optex Systems Holdings 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. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Optex Systems Holdings' EPS grew from US$0.23 to US$0.52, over the previous 12 months. It's a rarity to see 129% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
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. The music to the ears of Optex Systems Holdings shareholders is that EBIT margins have grown from 9.2% to 14% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Optex Systems Holdings isn't a huge company, given its market capitalisation of US$56m. That makes it extra important to check on its balance sheet strength.
Are Optex Systems Holdings Insiders Aligned With All Shareholders?
It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. For companies with market capitalisations under US$200m, like Optex Systems Holdings, the median CEO pay is around US$658k.
Optex Systems Holdings' CEO took home a total compensation package worth US$459k in the year leading up to October 2023. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Is Optex Systems Holdings Worth Keeping An Eye On?
Optex Systems Holdings' earnings have taken off in quite an impressive fashion. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. It will definitely require further research to be sure, but it does seem that Optex Systems Holdings has the hallmarks of a quality business; and that would make it well worth watching. However, before you get too excited we've discovered 3 warning signs for Optex Systems Holdings (1 is a bit concerning!) that you should be aware of.
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 the US 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.
