We Ran A Stock Scan For Earnings Growth And Civitas Resources (NYSE:CIVI) Passed With Ease

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.

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 Civitas Resources (NYSE:CIVI). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Civitas Resources with the means to add long-term value to shareholders.

See our latest analysis for Civitas Resources

Civitas Resources' Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Civitas Resources' EPS has grown 32% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. The music to the ears of Civitas Resources shareholders is that EBIT margins have grown from 26% to 50% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Civitas Resources?

Are Civitas Resources Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We do note that, in the last year, insiders sold US$124k worth of shares. But that's far less than the US$2.7m insiders spent purchasing stock. We find this encouraging because it suggests they are optimistic about Civitas Resources'future. We also note that it was the President, M. Doyle, who made the biggest single acquisition, paying US$2.0m for shares at about US$59.66 each.

Along with the insider buying, another encouraging sign for Civitas Resources is that insiders, as a group, have a considerable shareholding. To be specific, they have US$23m worth of shares. This considerable investment should help drive long-term value in the business. Despite being just 0.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Civitas Resources Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Civitas Resources' strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. Still, you should learn about the 1 warning sign we've spotted with Civitas Resources.

The good news is that Civitas Resources is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.