Here's Why We Think CI Resources (ASX:CII) Might Deserve Your Attention Today

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like CI Resources (ASX:CII). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for CI Resources

How Fast Is CI Resources Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for CI Resources to have grown EPS from AU$0.064 to AU$0.19 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. EBIT margins for CI Resources remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 216% to AU$900m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

CI Resources isn't a huge company, given its market capitalisation of AU$141m. That makes it extra important to check on its balance sheet strength.

Are CI Resources Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own CI Resources shares worth a considerable sum. Indeed, they hold AU$41m worth of its stock. This considerable investment should help drive long-term value in the business. That amounts to 29% of the company, demonstrating a degree of high-level alignment with shareholders.

Does CI Resources Deserve A Spot On Your Watchlist?

CI Resources' earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering CI Resources for a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 5 warning signs with CI Resources (at least 3 which are potentially serious) , and understanding them should be part of your investment process.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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

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

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.