With EPS Growth And More, Consumer Portfolio Services (NASDAQ:CPSS) 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. 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.

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 Consumer Portfolio Services (NASDAQ:CPSS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Consumer Portfolio Services with the means to add long-term value to shareholders.

See our latest analysis for Consumer Portfolio Services

How Fast Is Consumer Portfolio Services Growing Its Earnings Per Share?

Consumer Portfolio Services 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. To the delight of shareholders, Consumer Portfolio Services' EPS soared from US$2.86 to US$3.79, over the last year. That's a commendable gain of 32%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Consumer Portfolio Services' revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Consumer Portfolio Services maintained stable EBIT margins over the last year, all while growing revenue 8.3% to US$248m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since Consumer Portfolio Services is no giant, with a market capitalisation of US$268m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Consumer Portfolio Services Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Consumer Portfolio Services insiders own a meaningful share of the business. In fact, they own 38% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have US$101m invested in the business, at the current share price. That's nothing to sneeze at!

Does Consumer Portfolio Services Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Consumer Portfolio Services' strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You should always think about risks though. Case in point, we've spotted 1 warning sign for Consumer Portfolio Services you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.