I Ran A Stock Scan For Earnings Growth And Pangaea Logistics Solutions (NASDAQ:PANL) Passed With Ease

By
Simply Wall St
Published
April 19, 2022
NasdaqCM:PANL
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Pangaea Logistics Solutions (NASDAQ:PANL). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for Pangaea Logistics Solutions

How Quickly Is Pangaea Logistics Solutions Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that Pangaea Logistics Solutions has grown EPS by 52% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Pangaea Logistics Solutions is growing revenues, and EBIT margins improved by 5.2 percentage points to 11%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
NasdaqCM:PANL Earnings and Revenue History April 19th 2022

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Pangaea Logistics Solutions?

Are Pangaea Logistics Solutions Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.

Pangaea Logistics Solutions top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Lead Independent Director, Carl Boggild, paid US$100k to buy shares at an average price of US$4.68.

Along with the insider buying, another encouraging sign for Pangaea Logistics Solutions is that insiders, as a group, have a considerable shareholding. With a whopping US$54m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 22% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Mark Filanowski, is paid less than the median for similar sized companies. For companies with market capitalizations between US$100m and US$400m, like Pangaea Logistics Solutions, the median CEO pay is around US$1.3m.

Pangaea Logistics Solutions offered total compensation worth US$995k to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Does Pangaea Logistics Solutions Deserve A Spot On Your Watchlist?

Pangaea Logistics Solutions's earnings have taken off like any random crypto-currency did, back in 2017. 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 Pangaea Logistics Solutions deserves timely attention. You should always think about risks though. Case in point, we've spotted 4 warning signs for Pangaea Logistics Solutions you should be aware of, and 2 of them are potentially serious.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Pangaea Logistics Solutions, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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