Do CPS Technologies's (NASDAQ:CPSH) Earnings Warrant Your Attention?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in CPS Technologies (NASDAQ:CPSH). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 CPS Technologies

CPS Technologies's Improving Profits

In the last three years CPS Technologies's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, CPS Technologies's EPS shot from US$0.11 to US$0.20, over the last year. You don't see 76% year-on-year growth like that, very often.

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. To cut to the chase CPS Technologies's EBIT margins dropped last year, and so did its revenue. That will not make it easy to grow profits, to say the least.

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.

CPS Technologies isn't a huge company, given its market capitalization of US$82m. That makes it extra important to check on its balance sheet strength.

Are CPS Technologies Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that CPS Technologies insiders have a significant amount of capital invested in the stock. To be specific, they have US$18m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 22% of the company, demonstrating a degree of high-level alignment with shareholders.

Does CPS Technologies Deserve A Spot On Your Watchlist?

CPS Technologies's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering CPS Technologies for a spot on your watchlist. Even so, be aware that CPS Technologies is showing 2 warning signs in our investment analysis , you should know about...

Although CPS Technologies 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.

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.

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