With EPS Growth And More, XPEL (NASDAQ:XPEL) Makes An Interesting Case

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. 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 XPEL (NASDAQ:XPEL). 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.

Check out our latest analysis for XPEL

How Quickly Is XPEL Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. XPEL's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 56%. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. XPEL maintained stable EBIT margins over the last year, all while growing revenue 37% to US$294m. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of XPEL's forecast profits?

Are XPEL Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. 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. We note that their impressive stake in the company is worth US$540m. That equates to 28% of the company, making insiders powerful and aligned with other shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like XPEL with market caps between US$1.0b and US$3.2b is about US$5.5m.

XPEL's CEO took home a total compensation package of US$1.3m in the year prior to December 2021. First impressions seem to indicate a compensation policy that is favourable to shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add XPEL To Your Watchlist?

XPEL's earnings per share have been soaring, with growth rates sky high. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so the writing on the wall tells us that XPEL is worth considering carefully. You should always think about risks though. Case in point, we've spotted 2 warning signs for XPEL you should be aware of, and 1 of them is a bit unpleasant.

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.