Here's Why We Think Titan Machinery (NASDAQ:TITN) Is Well Worth Watching

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. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Titan Machinery (NASDAQ:TITN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Titan Machinery with the means to add long-term value to shareholders.

View our latest analysis for Titan Machinery

How Fast Is Titan Machinery Growing Its Earnings Per Share?

Titan Machinery has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Titan Machinery's EPS shot up from US$3.84 to US$5.14; a result that's bound to keep shareholders happy. That's a fantastic gain of 34%.

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. EBIT margins for Titan Machinery remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 28% to US$2.5b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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 Titan Machinery's future profits.

Are Titan Machinery Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Titan Machinery top brass are certainly in sync, not having sold any shares, over the last year. But the real excitement comes from the US$89k that Lead Independent Director Stan Erickson spent buying shares (at an average price of about US$29.67). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Along with the insider buying, another encouraging sign for Titan Machinery is that insiders, as a group, have a considerable shareholding. Given insiders own a significant chunk of shares, currently valued at US$65m, they have plenty of motivation to push the business to succeed. Amounting to 11% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Titan Machinery's CEO, David Meyer, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Titan Machinery with market caps between US$400m and US$1.6b is about US$3.5m.

The Titan Machinery CEO received total compensation of just US$487k in the year to January 2023. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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.

Should You Add Titan Machinery To Your Watchlist?

For growth investors, Titan Machinery's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 3 warning signs for Titan Machinery you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Titan Machinery isn't the only one. You can see a a free list of them here.

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.