Should You Be Adding Cryosite (ASX:CTE) To Your Watchlist Today?

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 currently lacks a track record of revenue and 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. 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 Cryosite (ASX:CTE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Cryosite with the means to add long-term value to shareholders.

View our latest analysis for Cryosite

Cryosite's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Cryosite's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 44%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. The good news is that Cryosite is growing revenues, and EBIT margins improved by 4.8 percentage points to 14%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since Cryosite is no giant, with a market capitalisation of AU$37m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Cryosite 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Shareholders in Cryosite will be more than happy to see insiders committing themselves to the company, spending AU$1.1m on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. We also note that it was the Non Executive Director, Andrew Kroger, who made the biggest single acquisition, paying AU$671k for shares at about AU$0.43 each.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Cryosite will reveal that insiders own a significant piece of the pie. In fact, they own 54% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Although, with Cryosite being valued at AU$37m, this is a small company we're talking about. That means insiders only have AU$20m worth of shares, despite the large proportional holding. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Cryosite's CEO, John Hogg, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations under AU$288m, like Cryosite, the median CEO pay is around AU$403k.

The Cryosite CEO received AU$337k in compensation for the year ending June 2021. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Cryosite Deserve A Spot On Your Watchlist?

Cryosite's earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Cryosite belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Cryosite you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Cryosite 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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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.