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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like Eagle Plains Resources (CVE:EPL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Eagle Plains Resources with the means to add long-term value to shareholders.
How Quickly Is Eagle Plains Resources Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Eagle Plains Resources has achieved impressive annual EPS growth of 38%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. While Eagle Plains Resources did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Eagle Plains Resources isn't a huge company, given its market capitalisation of CA$25m. That makes it extra important to check on its balance sheet strength.
Are Eagle Plains Resources Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Any way you look at it Eagle Plains Resources shareholders can gain quiet confidence from the fact that insiders shelled out CA$388k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. Zooming in, we can see that the biggest insider purchase was by President Timothy Termuende for CA$102k worth of shares, at about CA$0.17 per share.
It's commendable to see that insiders have been buying shares in Eagle Plains Resources, but there is more evidence of shareholder friendly management. To be specific, the CEO is paid modestly when compared to company peers of the same size. For companies with market capitalisations under CA$268m, like Eagle Plains Resources, the median CEO pay is around CA$239k.
The Eagle Plains Resources CEO received total compensation of just CA$109k in the year to December 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. 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 Eagle Plains Resources Deserve A Spot On Your Watchlist?
Eagle Plains Resources' earnings per share growth have been climbing higher at an appreciable rate. Better yet, we can observe insider buying and the chief executive pay looks reasonable. The strong EPS growth suggests Eagle Plains Resources may be at an inflection point. If so, then its potential for further gains probably merit a spot on your watchlist. However, before you get too excited we've discovered 3 warning signs for Eagle Plains Resources that you should be aware of.
Keen growth investors love to see insider buying. Thankfully, Eagle Plains Resources 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.
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