Here's Why Art's-Way Manufacturing (NASDAQ:ARTW) Has Caught The Eye Of Investors

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Art's-Way Manufacturing (NASDAQ:ARTW). 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.

View our latest analysis for Art's-Way Manufacturing

How Fast Is Art's-Way Manufacturing Growing Its Earnings Per Share?

Over the last three years, Art's-Way Manufacturing has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Art's-Way Manufacturing's EPS catapulted from US$0.079 to US$0.15, over the last year. It's a rarity to see 90% year-on-year growth like that.

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. The good news is that Art's-Way Manufacturing is growing revenues, and EBIT margins improved by 2.7 percentage points to 5.1%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

Since Art's-Way Manufacturing is no giant, with a market capitalisation of US$10m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Art's-Way Manufacturing Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. Our analysis has discovered that the median total compensation for the CEOs of companies like Art's-Way Manufacturing with market caps under US$200m is about US$662k.

Art's-Way Manufacturing's CEO took home a total compensation package worth US$425k in the year leading up to November 2022. That is actually below the median for CEO's of similarly sized companies. 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 a culture of integrity, in a broader sense.

Does Art's-Way Manufacturing Deserve A Spot On Your Watchlist?

Art's-Way Manufacturing's earnings per share have been soaring, with growth rates sky high. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. It will definitely require further research to be sure, but it does seem that Art's-Way Manufacturing has the hallmarks of a quality business; and that would make it well worth watching. We should say that we've discovered 2 warning signs for Art's-Way Manufacturing (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.