Yahoo Finance With EPS Growth And More, Calnex Solutions (LON:CLX) Is Interesting
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Calnex Solutions (LON:CLX). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
View our latest analysis for Calnex Solutions
How Fast Is Calnex Solutions Growing?
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). That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Calnex Solutions grew its EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Calnex Solutions shareholders can take confidence from the fact that EBIT margins are up from 21% to 27%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Since Calnex Solutions is no giant, with a market capitalization of UK£137m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Calnex Solutions Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Calnex Solutions shares worth a considerable sum. To be specific, they have UK£34m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 25% of the company, demonstrating a degree of high-level alignment with shareholders.
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Calnex Solutions with market caps between UK£80m and UK£319m is about UK£548k.
The Calnex Solutions CEO received total compensation of just UK£185k in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Is Calnex Solutions Worth Keeping An Eye On?
One important encouraging feature of Calnex Solutions is that it is growing profits. Earnings growth might be the main game for Calnex Solutions, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. We should say that we've discovered 1 warning sign for Calnex Solutions that you should be aware of before investing here.
Although Calnex Solutions certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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.
