Stock Analysis

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

NasdaqGS:TITN
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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.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Titan Machinery (NASDAQ:TITN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Titan Machinery

Titan Machinery's Improving Profits

Over the last three years, Titan Machinery 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, Titan Machinery's EPS catapulted from US$1.44 to US$3.85, over the last year. It's not often a company can achieve year-on-year growth of 167%.

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. Titan Machinery shareholders can take confidence from the fact that EBIT margins are up from 3.8% to 6.1%, and revenue is growing. That's great to see, on both counts.

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.

earnings-and-revenue-history
NasdaqGS:TITN Earnings and Revenue History October 4th 2022

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

Are Titan Machinery 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. So it is good to see that Titan Machinery insiders have a significant amount of capital invested in the stock. Given insiders own a significant chunk of shares, currently valued at US$74m, they have plenty of motivation to push the business to succeed. At 11% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

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 Titan Machinery with market caps between US$400m and US$1.6b is about US$4.1m.

Titan Machinery's CEO took home a total compensation package of US$484k in the year prior to January 2022. 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.

Does Titan Machinery Deserve A Spot On Your Watchlist?

Titan Machinery's earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Titan Machinery certainly ticks a few boxes, so we think it's probably well worth further consideration. Still, you should learn about the 2 warning signs we've spotted with Titan Machinery (including 1 which is a bit unpleasant).

Although Titan Machinery 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.

Valuation is complex, but we're helping make it simple.

Find out whether Titan Machinery is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.