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 completely lacks a track record of revenue and 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like CPH Chemie + Papier Holding (VTX:CPHN). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
How Quickly Is CPH Chemie + Papier Holding Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that CPH Chemie + Papier Holding has grown EPS by 47% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While CPH Chemie + Papier Holding may have maintained EBIT margins over the last year, revenue has fallen. And that does make me a little more cautious of the stock.
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.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future CPH Chemie + Papier Holding EPS 100% free.
Are CPH Chemie + Papier Holding Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own CPH Chemie + Papier Holding shares worth a considerable sum. To be specific, they have CHF39m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 8.9% of the company, demonstrating a degree of high-level alignment with shareholders.
Does CPH Chemie + Papier Holding Deserve A Spot On Your Watchlist?
CPH Chemie + Papier Holding's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering CPH Chemie + Papier Holding for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for CPH Chemie + Papier Holding you should be aware of, and 1 of them is concerning.
Although CPH Chemie + Papier Holding certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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. 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.
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