We Ran A Stock Scan For Earnings Growth And General Capital (NZSE:GEN) Passed With Ease

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 General Capital (NZSE:GEN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for General Capital

How Fast Is General Capital Growing Its Earnings Per Share?

In the last three years General Capital's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, General Capital's EPS grew from NZ$0.0078 to NZ$0.013, over the previous 12 months. Year on year growth of 70% is certainly a sight to behold. That could be a sign that the business has reached 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. Our analysis has highlighted that General Capital's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. General Capital shareholders can take confidence from the fact that EBIT margins are up from 61% to 66%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

General Capital isn't a huge company, given its market capitalisation of NZ$13m. That makes it extra important to check on its balance sheet strength.

Are General Capital Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that General Capital insiders own a meaningful share of the business. Indeed, with a collective holding of 61%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with General Capital being valued at NZ$13m, this is a small company we're talking about. That means insiders only have NZ$8.1m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to General Capital, with market caps under NZ$342m is around NZ$636k.

The General Capital CEO received NZ$396k in compensation for the year ending March 2023. That seems pretty reasonable, especially given it's below the median for similar 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.

Does General Capital Deserve A Spot On Your Watchlist?

General Capital's earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. General Capital is certainly doing some things right and is well worth investigating. Even so, be aware that General Capital is showing 2 warning signs in our investment analysis , and 1 of those is potentially serious...

Although General Capital certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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. 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.