Do Carpenter Technology's (NYSE:CRS) Earnings Warrant Your Attention?

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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

Check out our latest analysis for Carpenter Technology

Carpenter Technology's Improving Profits

Over the last three years, Carpenter Technology 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. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Carpenter Technology's EPS catapulted from US$2.18 to US$4.56, over the last year. Year on year growth of 109% is certainly a sight to behold.

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. Carpenter Technology shareholders can take confidence from the fact that EBIT margins are up from 6.8% to 14%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Carpenter Technology.

Are Carpenter Technology Insiders Aligned With All Shareholders?

Since Carpenter Technology has a market capitalisation of US$9.2b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$220m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.

Is Carpenter Technology Worth Keeping An Eye On?

Carpenter Technology's earnings have taken off in quite an impressive fashion. That EPS growth certainly is attention grabbing, and the large insider ownership only serves to further stoke our interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Carpenter Technology for a spot on your watchlist. It is worth noting though that we have found 1 warning sign for Carpenter Technology that you need to take into consideration.

Although Carpenter Technology 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.