Do Pittards' (LON:PTD) Earnings Warrant Your Attention?

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. 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 Pittards (LON:PTD). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out the opportunities and risks within the GB Luxury industry.

Pittards' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Pittards has achieved impressive annual EPS growth of 59%, compound, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of Pittards shareholders is that EBIT margins have grown from 1.2% to 5.3% in the last 12 months and revenues are on an upwards trend as well. 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.

Pittards isn't a huge company, given its market capitalisation of UK£8.1m. That makes it extra important to check on its balance sheet strength.

Are Pittards Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's nice to see that there have been no reports of any insiders selling shares in Pittards in the previous 12 months. So it's definitely nice that CEO, Company Secretary & Executive Director Reg Hankey bought UK£11k worth of shares at an average price of around UK£0.55. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Pittards.

Recent insider purchases of Pittards stock is not the only way management has kept the interests of the general public shareholders in mind. Namely, Pittards has a very reasonable level of CEO pay. For companies with market capitalisations under UK£173m, like Pittards, the median CEO pay is around UK£295k.

Pittards' CEO took home a total compensation package worth UK£227k in the year leading up to December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Pittards Deserve A Spot On Your Watchlist?

Pittards' earnings per share growth have been climbing higher at an appreciable rate. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Pittards may be at an inflection point. For those attracted to fast growth, we'd suggest this stock merits monitoring. It is worth noting though that we have found 2 warning signs for Pittards that you need to take into consideration.

The good news is that Pittards is not the only growth stock with insider buying. Here's a list of them... 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.