Is Now The Time To Put Cal-Maine Foods (NASDAQ:CALM) On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

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

How Fast Is Cal-Maine Foods Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Cal-Maine Foods' EPS has grown 35% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. The music to the ears of Cal-Maine Foods shareholders is that EBIT margins have grown from 21% to 25% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

View our latest analysis for Cal-Maine Foods

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Cal-Maine Foods' forecast profits?

Are Cal-Maine Foods Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Cal-Maine Foods insiders have a significant amount of capital invested in the stock. Notably, they have an enviable stake in the company, worth US$165m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Does Cal-Maine Foods Deserve A Spot On Your Watchlist?

You can't deny that Cal-Maine Foods has grown its earnings per share at a very impressive rate. That's attractive. 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. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. However, before you get too excited we've discovered 3 warning signs for Cal-Maine Foods (1 is significant!) that you should be aware of.

Although Cal-Maine Foods certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of companies that not only boast of strong growth but have strong insider backing.

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.