If EPS Growth Is Important To You, Callon Petroleum (NYSE:CPE) Presents An Opportunity

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

In contrast to all that, many investors prefer to focus on companies like Callon Petroleum (NYSE:CPE), which has not only revenues, but also profits. 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 Callon Petroleum

How Fast Is Callon Petroleum Growing Its Earnings Per Share?

Over the last three years, Callon Petroleum 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. As a result, we'll zoom in on growth over the last year, instead. Callon Petroleum's EPS has risen over the last 12 months, growing from US$13.16 to US$15.07. That's a 14% gain; respectable growth in the broader scheme of things.

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. Callon Petroleum's EBIT margins are flat but, worryingly, its revenue is actually down. Suffice it to say that is not a great sign of growth.

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.

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 Callon Petroleum?

Are Callon Petroleum 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's pleasing to note that insiders spent US$2.1m buying Callon Petroleum shares, over the last year, without reporting any share sales whatsoever. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the Independent Director, Steven Webster, who made the biggest single acquisition, paying US$1.5m for shares at about US$31.63 each.

On top of the insider buying, it's good to see that Callon Petroleum insiders have a valuable investment in the business. As a matter of fact, their holding is valued at US$46m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 1.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Callon Petroleum's CEO, Joe Gatto, 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 Callon Petroleum with market caps between US$2.0b and US$6.4b is about US$6.8m.

Callon Petroleum's CEO took home a total compensation package worth US$4.2m in the year leading up to December 2022. That seems pretty reasonable, especially given it's below the median for similar 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 good governance, more generally.

Is Callon Petroleum Worth Keeping An Eye On?

One positive for Callon Petroleum is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Callon Petroleum (1 can't be ignored) you should be aware of.

The good news is that Callon Petroleum 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.