Stock Analysis

Here's Why We Think CTI Logistics (ASX:CLX) Is Well Worth Watching

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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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in CTI Logistics (ASX:CLX). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide CTI Logistics with the means to add long-term value to shareholders.

View our latest analysis for CTI Logistics

How Fast Is CTI Logistics Growing Its Earnings Per Share?

In the last three years CTI Logistics' 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. In impressive fashion, CTI Logistics' EPS grew from AU$0.11 to AU$0.20, over the previous 12 months. It's a rarity to see 84% year-on-year growth like that.

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 CTI Logistics is growing revenues, and EBIT margins improved by 3.1 percentage points to 8.5%, over the last year. Both of which are great metrics to check off for potential growth.

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.

ASX:CLX Earnings and Revenue History September 3rd 2022

CTI Logistics isn't a huge company, given its market capitalisation of AU$110m. That makes it extra important to check on its balance sheet strength.

Are CTI Logistics Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that CTI Logistics insiders own a meaningful share of the business. In fact, they own 47% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about AU$51m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is CTI Logistics Worth Keeping An Eye On?

CTI Logistics' earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering CTI Logistics for a spot on your watchlist. However, before you get too excited we've discovered 2 warning signs for CTI Logistics that you should be aware of.

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.

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

Find out whether CTI Logistics 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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CTI Logistics

CTI Logistics Limited provides transport and logistics services in Australia.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Future Growth0
Past Performance5
Financial Health4

Read more about these checks in the individual report sections or in our analysis model.

Solid track record, good value and pays a dividend.