I Ran A Stock Scan For Earnings Growth And Credit Intelligence (ASX:CI1) Passed With Ease

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Credit Intelligence (ASX:CI1). 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.

See our latest analysis for Credit Intelligence

How Fast Is Credit Intelligence Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Like a falcon taking flight, Credit Intelligence's EPS soared from AU$0.0018 to AU$0.0025, over the last year. That's a commendable gain of 39%.

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. Credit Intelligence shareholders can take confidence from the fact that EBIT margins are up from 30% to 43%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Since Credit Intelligence is no giant, with a market capitalization of AU$27m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Credit Intelligence Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Credit Intelligence insiders own a significant number of shares certainly appeals to me. Actually, with 40% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only AU$27m Credit Intelligence is really small for a listed company. So despite a large proportional holding, insiders only have AU$11m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Credit Intelligence To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Credit Intelligence's strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. It is worth noting though that we have found 5 warning signs for Credit Intelligence (1 is a bit unpleasant!) that you need to take into consideration.

Although Credit Intelligence 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. 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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