With EPS Growth And More, Chesapeake Utilities (NYSE:CPK) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Chesapeake Utilities (NYSE:CPK). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Chesapeake Utilities

How Quickly Is Chesapeake Utilities Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. We can see that in the last three years Chesapeake Utilities grew its EPS by 11% per year. That's a pretty good rate, if the company can sustain it.

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. EBIT margins for Chesapeake Utilities remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 19% to US$681m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

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

Are Chesapeake Utilities 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news for Chesapeake Utilities shareholders is that no insiders reported selling shares in the last year. Add in the fact that Lila Jaber, the Independent Director of the company, paid US$50k for shares at around US$118 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Chesapeake Utilities.

On top of the insider buying, it's good to see that Chesapeake Utilities insiders have a valuable investment in the business. Holding US$52m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This should keep them focused on creating long term value for shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, Jeff Householder, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Chesapeake Utilities with market caps between US$1.0b and US$3.2b is about US$5.3m.

Chesapeake Utilities offered total compensation worth US$2.8m to its CEO in the year to December 2021. That is actually below the median for CEO's of similarly 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Chesapeake Utilities Worth Keeping An Eye On?

As previously touched on, Chesapeake Utilities is a growing business, which is encouraging. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Chesapeake Utilities (1 is concerning) you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Chesapeake Utilities isn't the only one. You can see a a free list of them here.

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.