Here's Why We Think CVR Energy (NYSE:CVI) Is Well Worth Watching

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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

See our latest analysis for CVR Energy

How Fast Is CVR Energy Growing Its Earnings Per Share?

Over the last three years, CVR Energy 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. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, CVR Energy's EPS soared from US$3.26 to US$5.27, over the last year. That's a impressive gain of 62%.

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. CVR Energy maintained stable EBIT margins over the last year, all while growing revenue 4.1% to US$9.9b. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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

Are CVR Energy Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to CVR Energy, with market caps between US$2.0b and US$6.4b, is around US$6.8m.

CVR Energy offered total compensation worth US$4.3m to its CEO in the year to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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.

Should You Add CVR Energy To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into CVR Energy's strong EPS growth. With swiftly growing earnings, the best days may still be to come, and the modest CEO pay suggests the company is careful with cash. We think that based on its merits alone, this stock is worth watching into the future. However, before you get too excited we've discovered 3 warning signs for CVR Energy (1 is a bit unpleasant!) that you should be aware of.

Although CVR Energy 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.

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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.