We Ran A Stock Scan For Earnings Growth And XPEL (NASDAQ:XPEL) Passed With Ease

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 currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like XPEL (NASDAQ:XPEL), 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.

View our latest analysis for XPEL

How Fast Is XPEL Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. XPEL's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 44%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. While we note XPEL achieved similar EBIT margins to last year, revenue grew by a solid 25% to US$324m. That's a real positive.

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.

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 XPEL's future profits.

Are XPEL Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. XPEL followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$497m. That equates to 27% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between US$1.0b and US$3.2b, like XPEL, the median CEO pay is around US$5.4m.

The XPEL CEO received total compensation of just US$1.3m in the year to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is XPEL Worth Keeping An Eye On?

XPEL's earnings per share have been soaring, with growth rates sky high. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. XPEL certainly ticks a few boxes, so we think it's probably well worth further consideration. Don't forget that there may still be risks. For instance, we've identified 1 warning sign for XPEL that you should be aware of.

Although XPEL 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.