Yahoo Finance We Ran A Stock Scan For Earnings Growth And Eclipx Group (ASX:ECX) Passed With Ease
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.
In contrast to all that, many investors prefer to focus on companies like Eclipx Group (ASX:ECX), which has not only revenues, but also profits. 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.
Check out our latest analysis for Eclipx Group
How Fast Is Eclipx Group Growing Its Earnings Per Share?
Over the last three years, Eclipx Group 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. So it would be better to isolate the growth rate over the last year for our analysis. Eclipx Group's EPS skyrocketed from AU$0.25 to AU$0.39, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 56%.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Eclipx Group shareholders is that EBIT margins have grown from 19% to 23% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Eclipx Group.
Are Eclipx Group 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that Eclipx Group insiders spent AU$253k on stock, over the last year; in contrast, we didn't see any selling. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Director Russell Shields for AU$97k worth of shares, at about AU$1.95 per share.
It's reassuring that Eclipx Group insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Namely, Eclipx Group has a very reasonable level of CEO pay. For companies with market capitalisations between AU$299m and AU$1.2b, like Eclipx Group, the median CEO pay is around AU$1.2m.
The Eclipx Group CEO received AU$813k in compensation for the year ending September 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Eclipx Group Deserve A Spot On Your Watchlist?
For growth investors, Eclipx Group's raw rate of earnings growth is a beacon in the night. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The overriding message from this quick rundown is yes, this stock is worth investigating further. We don't want to rain on the parade too much, but we did also find 2 warning signs for Eclipx Group (1 can't be ignored!) that you need to be mindful of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Eclipx Group, 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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