Should You Be Adding CTI Logistics (ASX:CLX) To Your Watchlist Today?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 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.

Check out our latest analysis for CTI Logistics

How Fast Is CTI Logistics Growing Its Earnings Per Share?

Over the last three years, CTI Logistics 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, CTI Logistics' EPS grew from AU$0.11 to AU$0.20, over the previous 12 months. Year on year growth of 83% is certainly a sight to behold.

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. CTI Logistics shareholders can take confidence from the fact that EBIT margins are up from 5.4% to 8.5%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

CTI Logistics isn't a huge company, given its market capitalisation of AU$140m. That makes it extra important to check on its balance sheet strength.

Are CTI Logistics Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So those who are interested in CTI Logistics will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. To be exact, company insiders hold 53% of the company, so their decisions have a significant impact on their investments. 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. To give you an idea, the value of insiders' holdings in the business are valued at AU$74m at the current share price. That's nothing to sneeze at!

Is CTI Logistics Worth Keeping An Eye On?

CTI Logistics' earnings per share growth have been climbing higher at an appreciable rate. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So at the surface level, CTI Logistics is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. We don't want to rain on the parade too much, but we did also find 2 warning signs for CTI Logistics that you need to be mindful of.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.

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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.