Here's Why We Think CytomX Therapeutics (NASDAQ:CTMX) 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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 CytomX Therapeutics (NASDAQ:CTMX). 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.

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CytomX Therapeutics' Improving Profits

CytomX Therapeutics has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. CytomX Therapeutics' EPS has risen over the last 12 months, growing from US$0.21 to US$0.26. This amounts to a 24% gain; a figure that shareholders will be pleased to see.

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. CytomX Therapeutics shareholders can take confidence from the fact that EBIT margins are up from 9.1% to 24%, and revenue is growing. 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 CytomX Therapeutics

Fortunately, we've got access to analyst forecasts of CytomX Therapeutics' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are CytomX Therapeutics 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 CytomX Therapeutics, with market caps between US$200m and US$800m, is around US$2.8m.

CytomX Therapeutics' CEO took home a total compensation package worth US$1.8m in the year leading up to December 2024. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Should You Add CytomX Therapeutics To Your Watchlist?

As previously touched on, CytomX Therapeutics is a growing business, which is encouraging. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. All things considered, CytomX Therapeutics is definitely worth taking a deeper dive into. We don't want to rain on the parade too much, but we did also find 3 warning signs for CytomX Therapeutics that you need to be mindful of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

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.