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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.
So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Clime Investment Management (ASX:CIW). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Clime Investment Management with the means to add long-term value to shareholders.
How Quickly Is Clime Investment Management Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you’d expect a company’s share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Clime Investment Management has grown EPS by 27% per year, compound, in the last three years. If the company can sustain that sort of growth, we’d expect shareholders to come away satisfied.
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. Clime Investment Management shareholders can take confidence from the fact that EBIT margins are up from 3.5% to 14%, and revenue is growing. 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. To see the actual numbers, click on the chart.
Since Clime Investment Management is no giant, with a market capitalisation of AU$36m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Clime Investment Management Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.
It’s good to see Clime Investment Management insiders walking the walk, by spending AU$336k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what’s to come. It is also worth noting that it was Founder & Non-Independent Executive Chairman John Abernethy who made the biggest single purchase, worth AU$47k, paying AU$0.60 per share.
Does Clime Investment Management Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Clime Investment Management’s strong EPS growth. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. So on this analysis, Clime Investment Management is probably worth spending some time on. Before you take the next step you should know about the 5 warning signs for Clime Investment Management (2 are a bit unpleasant!) that we have uncovered.
Keen growth investors love to see insider buying. Thankfully, Clime Investment Management 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.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here