Here's Why We Think Caspar Asset Management (WSE:CSR) Is Well Worth Watching

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 completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Caspar Asset Management (WSE:CSR). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Caspar Asset Management

Caspar Asset Management's Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Caspar Asset Management grew its EPS from zł2.00 to zł13.24, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Caspar Asset Management's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Caspar Asset Management's EBIT margins were flat over the last year, revenue grew by a solid 164% to zł55m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Since Caspar Asset Management is no giant, with a market capitalization of zł201m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Caspar Asset Management Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Caspar Asset Management insiders own a significant number of shares certainly appeals to me. In fact, they own 85% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have zł172m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Caspar Asset Management To Your Watchlist?

Caspar Asset Management's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Caspar Asset Management for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 3 warning signs for Caspar Asset Management (1 shouldn't be ignored!) that you need to be mindful of.

Although Caspar Asset Management certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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. 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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