Stock Analysis

If EPS Growth Is Important To You, CSP (NASDAQ:CSPI) Presents An Opportunity

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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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 CSP (NASDAQ:CSPI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for CSP

CSP's Improving Profits

In the last three years CSP's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, CSP's EPS shot from US$0.42 to US$1.03, over the last year. It's not often a company can achieve year-on-year growth of 146%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. CSP shareholders can take confidence from the fact that EBIT margins are up from -0.07% to 2.9%, and revenue is growing. Both of which are great metrics to check off for potential growth.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

NasdaqGM:CSPI Earnings and Revenue History February 6th 2024

Since CSP is no giant, with a market capitalisation of US$101m, you should definitely check its cash and debt before getting too excited about its prospects.

Are CSP Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One shining light for CSP is the serious outlay one insider has made to buy shares, in the last year. In one big hit, company insider Joseph Nerges paid US$330k, for shares at an average price of US$18.38 per share. It doesn't get much better than that, in terms of large investments from insiders.

The good news, alongside the insider buying, for CSP bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$31m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 31% of the shares on issue for the business, an appreciable amount considering the market cap.

Is CSP Worth Keeping An Eye On?

CSP's earnings per share growth have been climbing higher at an appreciable rate. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe CSP deserves timely attention. You still need to take note of risks, for example - CSP has 2 warning signs we think you should be aware of.

Keen growth investors love to see insider buying. Thankfully, CSP isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by recent insider buying.

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 CSP 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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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.