Here's Why We Think Chesswood Group (TSE:CHW) Is Well Worth Watching




  • In Business
  • 2022-05-14 13:46:28Z
  • By Simply Wall St.
 

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. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Chesswood Group (TSE:CHW). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

Check out our latest analysis for Chesswood Group

Chesswood Group's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, Chesswood Group has grown EPS by 5.3% per year. While that sort of growth rate isn't amazing, it does show the business is growing.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Chesswood Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Chesswood Group's EBIT margins were flat over the last year, revenue grew by a solid 41% to CA$115m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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 Chesswood Group?

Are Chesswood Group 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 Chesswood Group insiders have a significant amount of capital invested in the stock. To be specific, they have CA$53m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 21% of the company; visible skin in the game.

Should You Add Chesswood Group To Your Watchlist?

One positive for Chesswood Group is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. It is worth noting though that we have found 6 warning signs for Chesswood Group (3 are potentially serious!) that you need to take into consideration.

Although Chesswood Group 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

COMMENTS

More Related News

Investors in Titan Mining (TSE:TI) have made a respectable return of 63% over the past three years
Investors in Titan Mining (TSE:TI) have made a respectable return of 63% over the past three years

It might be of some concern to shareholders to see the Titan Mining Corporation ( TSE:TI ) share price down 11% in the...

Netflix trims staff to weather slowing growth
Netflix trims staff to weather slowing growth

Netflix on Tuesday said it laid off about two percent of its staff in a belt-tightening move after growth slowed at the once-booming streaming television...

Sea Surges After Gaming Sales Defy Post-Covid Internet Slowdown
Sea Surges After Gaming Sales Defy Post-Covid Internet Slowdown

(Bloomberg) -- Sea Ltd. rose more than 14% after reporting core gaming revenue grew faster than expected, offsetting a slowdown across the rest of the...

Investors in Top Shelf International Holdings (ASX:TSI) have unfortunately lost 32% over the last year
Investors in Top Shelf International Holdings (ASX:TSI) have unfortunately lost 32% over the last year

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While...

Legl, a SaaS for law firm workflows, tops up with $18M
Legl, a SaaS for law firm workflows, tops up with $18M

While valuations of public software-as-a-service businesses have been taking a hammering of late as investors cool on the sector amid a wider, post-pandemic ...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business