We Ran A Stock Scan For Earnings Growth And Crown Crafts (NASDAQ:CRWS) Passed With Ease
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Crown Crafts (NASDAQ:CRWS). 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.
View our latest analysis for Crown Crafts
How Quickly Is Crown Crafts Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Crown Crafts has managed to grow EPS by 25% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Crown Crafts remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 10% to US$87m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Since Crown Crafts is no giant, with a market capitalisation of US$62m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Crown Crafts Insiders Aligned With All Shareholders?
As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Crown Crafts, with market caps under US$200m is around US$752k.
Crown Crafts offered total compensation worth US$661k to its CEO in the year to March 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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. It can also be a sign of good governance, more generally.
Does Crown Crafts Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Crown Crafts' strong EPS growth. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. So this stock is well worth an addition to your watchlist as it has the potential to provide great value to shareholders. We should say that we've discovered 2 warning signs for Crown Crafts that you should be aware of before investing here.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
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.
