With EPS Growth And More, TXT e-solutions (BIT:TXT) Makes An Interesting Case

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in TXT e-solutions (BIT:TXT). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for TXT e-solutions

How Fast Is TXT e-solutions Growing Its Earnings Per Share?

TXT e-solutions has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, TXT e-solutions' EPS shot from €0.77 to €1.42, over the last year. It's a rarity to see 86% year-on-year growth like that. The best case scenario? That the business has hit a true inflection point.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for TXT e-solutions remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 78% to €218m. That's encouraging news for the company!

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.

Since TXT e-solutions is no giant, with a market capitalisation of €206m, you should definitely check its cash and debt before getting too excited about its prospects.

Are TXT e-solutions 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling TXT e-solutions shares, in the last year. Add in the fact that Daniele Misani, the Group CEO & Executive Director of the company, paid €33k for shares at around €7.35 each. It seems that at least one insider is prepared to show the market there is potential within TXT e-solutions.

It's reassuring that TXT e-solutions insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. To be specific, the CEO is paid modestly when compared to company peers of the same size. The median total compensation for CEOs of companies similar in size to TXT e-solutions, with market caps between €91m and €365m, is around €650k.

The TXT e-solutions CEO received €363k in compensation for the year ending December 2022. That is actually below the median for CEO's of similarly sized companies. 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 a culture of integrity, in a broader sense.

Is TXT e-solutions Worth Keeping An Eye On?

TXT e-solutions' earnings per share have been soaring, with growth rates sky high. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that TXT e-solutions is at an inflection point, given the EPS growth. If so, then its potential for further gains probably merit a spot on your watchlist. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of TXT e-solutions.

Keen growth investors love to see insider buying. Thankfully, TXT e-solutions isn't the only one. You can see a a free list of them here.

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.