Stock Analysis

Should You Be Adding California Nanotechnologies (CVE:CNO) To Your Watchlist Today?

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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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like California Nanotechnologies (CVE:CNO). 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 California Nanotechnologies

How Fast Is California Nanotechnologies Growing Its Earnings Per Share?

Over the last three years, California Nanotechnologies 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. California Nanotechnologies' EPS skyrocketed from US$0.011 to US$0.017, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 58%.

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. On the revenue front, California Nanotechnologies has done well over the past year, growing revenue by 82% to US$2.7m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

TSXV:CNO Earnings and Revenue History January 17th 2024

California Nanotechnologies isn't a huge company, given its market capitalisation of CA$11m. That makes it extra important to check on its balance sheet strength.

Are California Nanotechnologies Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Shareholders in California Nanotechnologies will be more than happy to see insiders committing themselves to the company, spending US$448k on shares in just twelve months. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. We also note that it was the CEO & Director, Eric Eyerman, who made the biggest single acquisition, paying CA$333k for shares at about CA$0.15 each.

Should You Add California Nanotechnologies To Your Watchlist?

You can't deny that California Nanotechnologies has grown its earnings per share at a very impressive rate. That's attractive. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. In essence, your time will not be wasted checking out California Nanotechnologies in more detail. We should say that we've discovered 5 warning signs for California Nanotechnologies (2 are a bit concerning!) that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of California Nanotechnologies, you'll probably love this curated collection of companies in CA that have witnessed growth alongside 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 California Nanotechnologies 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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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.