Is Now The Time To Put Excelsior Capital (ASX:ECL) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Excelsior Capital (ASX:ECL). 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.

See our latest analysis for Excelsior Capital

How Quickly Is Excelsior Capital Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Excelsior Capital's EPS has grown 19% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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 good news is that Excelsior Capital is growing revenues, and EBIT margins improved by 2.3 percentage points to 11%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Excelsior Capital isn't a huge company, given its market capitalisation of AU$52m. That makes it extra important to check on its balance sheet strength.

Are Excelsior Capital 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Excelsior Capital shares, in the last year. With that in mind, it's heartening that Peter E. Murray, the company insider of the company, paid AU$13k for shares at around AU$1.66 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Excelsior Capital.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Excelsior Capital insiders own more than a third of the company. To be exact, company insiders hold 62% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about AU$33m riding on the stock, at current prices. So there's plenty there to keep them focused!

Should You Add Excelsior Capital To Your Watchlist?

For growth investors, Excelsior Capital's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. These things considered, this is one stock worth watching. You still need to take note of risks, for example - Excelsior Capital has 1 warning sign we think you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Excelsior Capital 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.