Should You Be Adding Clime Investment Management (ASX:CIW) To Your Watchlist Today?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Clime Investment Management (ASX:CIW). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Clime Investment Management

Clime Investment Management's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Clime Investment Management has managed to grow EPS by 22% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. On the one hand, Clime Investment Management's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since Clime Investment Management is no giant, with a market capitalization of AU$44m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Clime Investment Management Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

We note that Clime Investment Management insiders spent AU$119k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Founder & Non-Independent Executive Chairman, John Abernethy, who made the biggest single acquisition, paying AU$36k for shares at about AU$0.56 each.

I do like that insiders have been buying shares in Clime Investment Management, but there is more evidence of shareholder friendly management. I refer to the very reasonable level of CEO pay. I discovered that the median total compensation for the CEOs of companies like Clime Investment Management with market caps under AU$274m is about AU$370k.

The Clime Investment Management CEO received total compensation of only AU$51k in the year to . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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.

Does Clime Investment Management Deserve A Spot On Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Clime Investment Management's strong EPS growth. But wait, it gets better. We have seen insider buying and the executive pay seems on the modest side of things. The message I'd take from this quick rundown is that, yes, this stock is worth investigating further. Don't forget that there may still be risks. For instance, we've identified 5 warning signs for Clime Investment Management (1 makes us a bit uncomfortable) you should be aware of.

The good news is that Clime Investment Management is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

If you decide to trade Clime Investment Management, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted

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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.