If You Like EPS Growth Then Check Out Capital (LON:CAPD) Before It's Too Late

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Capital (LON:CAPD). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Capital

Capital's Improving Profits

Over the last three years, Capital has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Capital's EPS shot from US$0.074 to US$0.14, over the last year. Year on year growth of 88% is certainly a sight to behold.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Capital maintained stable EBIT margins over the last year, all while growing revenue 7.5% to US$125m. That's a real positive.

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

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Capital's future profits.

Are Capital Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

It's a pleasure to note that insiders spent US$900k buying Capital shares, over the last year, without reporting any share sales whatsoever. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. We also note that it was the Executive Chairman & CEO, Jamie Boyton, who made the biggest single acquisition, paying UK£750k for shares at about UK£0.58 each.

The good news, alongside the insider buying, for Capital bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$31m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 27% of the company; visible skin in the game.

Does Capital Deserve A Spot On Your Watchlist?

Capital's earnings have taken off like any random crypto-currency did, back in 2017. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Capital deserves timely attention. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Capital (1 is potentially serious) you should be aware of.

The good news is that Capital 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. 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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