Stock Analysis

Is Now The Time To Put Eclipx Group (ASX:ECX) On Your Watchlist?

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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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Eclipx Group (ASX:ECX). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Eclipx Group

How Fast Is Eclipx Group Growing Its Earnings Per Share?

In the last three years Eclipx Group's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Eclipx Group's EPS shot up from AU$0.25 to AU$0.38; a result that's bound to keep shareholders happy. That's a commendable gain of 55%.

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. Eclipx Group shareholders can take confidence from the fact that EBIT margins are up from 19% to 23%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

ASX:ECX Earnings and Revenue History March 17th 2023

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Eclipx Group's forecast profits?

Are Eclipx Group 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Eclipx Group insiders refrain from selling stock during the year, but they also spent AU$253k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. It is also worth noting that it was Independent Non-Executive Director Russell Shields who made the biggest single purchase, worth AU$97k, paying AU$1.95 per share.

Recent insider purchases of Eclipx Group stock is not the only way management has kept the interests of the general public shareholders in mind. Specifically, the CEO is paid quite reasonably for a company of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Eclipx Group with market caps between AU$301m and AU$1.2b is about AU$1.2m.

The Eclipx Group CEO received AU$813k in compensation for the year ending September 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, 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.

Should You Add Eclipx Group To Your Watchlist?

You can't deny that Eclipx Group has grown its earnings per share at a very impressive rate. That's attractive. To add to the positives, Eclipx Group has recorded instances of insider buying and a modest executive pay to boot. On balance the message seems to be that this stock is worth looking at, at least for a while. Still, you should learn about the 2 warning signs we've spotted with Eclipx Group (including 1 which is a bit concerning).

Keen growth investors love to see insider buying. Thankfully, Eclipx Group 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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