We Ran A Stock Scan For Earnings Growth And Eckoh (LON:ECK) Passed With Ease

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Eckoh (LON:ECK), which has not only revenues, but also profits. 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 our latest analysis for Eckoh

How Fast Is Eckoh Growing Its Earnings Per Share?

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's easy to see why many investors focus in on EPS growth. In impressive fashion, Eckoh's EPS grew from UK£0.0068 to UK£0.013, over the previous 12 months. Year on year growth of 88% is certainly a sight to behold.

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. Eckoh shareholders can take confidence from the fact that EBIT margins are up from 10% to 14%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Eckoh.

Are Eckoh 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Eckoh top brass are certainly in sync, not having sold any shares, over the last year. But the real excitement comes from the UK£44k that Independent Non-Executive Director David Coghlan spent buying shares (at an average price of about UK£0.35). Purchases like this clue us in to the to the faith management has in the business' future.

Recent insider purchases of Eckoh stock is not the only way management has kept the interests of the general public shareholders in mind. To be specific, the CEO is paid modestly when compared to company peers of the same size. Our analysis has discovered that the median total compensation for the CEOs of companies like Eckoh with market caps between UK£79m and UK£317m is about UK£599k.

The Eckoh CEO received UK£453k in compensation for the year ending March 2023. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does Eckoh Deserve A Spot On Your Watchlist?

Eckoh's earnings have taken off in quite an impressive fashion. Better yet, we can observe insider buying and the chief executive pay looks reasonable. The strong EPS growth suggests Eckoh may be at an inflection point. For those attracted to fast growth, we'd suggest this stock merits monitoring. You should always think about risks though. Case in point, we've spotted 1 warning sign for Eckoh you should be aware of.

The good news is that Eckoh is not the only growth stock with insider buying. Here's a list of growth-focused companies in GB 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.