Stock Analysis

We Ran A Stock Scan For Earnings Growth And Eclipx Group (ASX:ECX) Passed With Ease

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ASX:ECX
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Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable 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.

See our latest analysis for Eclipx Group

Eclipx Group's Improving Profits

Over the last three years, Eclipx Group has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Eclipx Group's EPS grew from AU$0.16 to AU$0.33, over the previous 12 months. It's a rarity to see 102% year-on-year growth like that.

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. This approach makes Eclipx Group look pretty good, on balance; although revenue is flattish, EBIT margins improved from 13% to 23% in the last year. Which is a great look for the company.

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.

earnings-and-revenue-history
ASX:ECX Earnings and Revenue History September 29th 2022

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Eclipx Group's future profits.

Are Eclipx Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's nice to see that there have been no reports of any insiders selling shares in Eclipx Group in the previous 12 months. Add in the fact that Cathy Yuncken, the Independent Non-Executive Director of the company, paid AU$20k for shares at around AU$2.48 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Eclipx Group.

Does Eclipx Group Deserve A Spot On Your Watchlist?

Eclipx Group's earnings per share have been soaring, with growth rates sky high. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. If this is the case, then keeping a watch over Eclipx Group could be in your best interest. You still need to take note of risks, for example - Eclipx Group has 2 warning signs (and 1 which can't be ignored) we think you should know about.

The good news is that Eclipx Group 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.

Valuation is complex, but we're helping make it simple.

Find out whether Eclipx Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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