Stock Analysis

I Ran A Stock Scan For Earnings Growth And CorVel (NASDAQ:CRVL) Passed With Ease

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NasdaqGS:CRVL
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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like CorVel (NASDAQ:CRVL), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for CorVel

How Fast Is CorVel Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. CorVel managed to grow EPS by 13% per year, over three years. That's a good rate of growth, if it can be sustained.

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. CorVel shareholders can take confidence from the fact that EBIT margins are up from 9.4% to 12%, and revenue is growing. That's great to see, on both counts.

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.

earnings-and-revenue-history
NasdaqGS:CRVL Earnings and Revenue History November 16th 2021

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check CorVel's balance sheet strength, before getting too excited.

Are CorVel Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that CorVel insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth US$362m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$2.0b and US$6.4b, like CorVel, the median CEO pay is around US$5.1m.

The CorVel CEO received total compensation of just US$1.5m in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does CorVel Deserve A Spot On Your Watchlist?

As I already mentioned, CorVel is a growing business, which is what I like to see. Earnings growth might be the main game for CorVel, but the fun does not stop there. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Still, you should learn about the 1 warning sign we've spotted with CorVel .

Although CorVel certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.

Valuation is complex, but we're helping make it simple.

Find out whether CorVel is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqGS:CRVL

CorVel

CorVel Corporation provides workers’ compensation, auto, liability, and health solutions for employers, third party administrators, insurance companies, and government agencies to assist them in managing the medical costs and monitoring the quality of care associated with healthcare claims.

Flawless balance sheet with proven track record.