Like a puppy chasing its tail, some new investors are often chasing “the next big thing,†even if that means buying “history stocks†with no income, let alone profit. But the reality is that when a business loses money every year, for long enough, its investors will usually take their share of those losses.
If, on the other hand, you like businesses that have revenue, and even profits, then you might be interested in Camtek (NASDAQ: CAMT). While profit isn’t necessarily social good, it’s easy to admire a business that can consistently produce it. Loss-making businesses always race against time to achieve financial viability, but time is often the friend of the profitable business, especially if it is growing.
See our latest review for Camtek
Camtek’s earnings per share are growing.
If you think the markets are even vaguely efficient, then in the long run you would expect a company’s stock price to follow its earnings per share (EPS). Therefore, there are a lot of investors who like to buy stocks in companies with growing EPS. Who among us wouldn’t applaud Camtek’s 38% stratospheric annual growth in EPS over the past three years? This kind of growth never lasts long, but like a shooting star, it’s worth watching when it does.
A close look at revenue growth and profit before interest and tax (EBIT) margins can help shed light on the sustainability of recent earnings growth. The good news is that Camtek is increasing its revenues and EBIT margins have improved 8.5 percentage points to 21%, over the past year. Checking those two boxes is a good sign of growth in my book.
In the graph below, you can see how the business has increased its profit and revenue over time. For more details, click on the image.
As we live in the present moment all the time, there is no doubt in my mind that the future matters more than the past. So why not check out this interactive graph showing future BPA estimates, for Camtek?
Are Camtek Insiders Aligned with All Shareholders?
Generally, I think it’s worth considering how much the CEO is paid, as unreasonably high rates could be viewed as being against the interests of shareholders. For companies with a market cap between $ 1.0 billion and $ 3.2 billion, like Camtek, the median CEO salary is around $ 3.7 million.
Camtek’s CEO received just US $ 1.2 million in total compensation for the end of the year. This is clearly well below par, so at first glance this arrangement seems generous to shareholders and indicates a culture of modest compensation. Although the level of CEO compensation is not a big factor in my view of the company, modest compensation is positive, as it suggests that the board has the interests of shareholders in mind. It can also be a sign of a culture of integrity, in the broad sense.
Is Camtek worth watching?
Camtek’s earnings per share took off like a rocket pointed straight at the moon. Such rapid EPS growth makes me wonder if the company has reached an inflection point (and I mean the right kind.) At the same time, reasonable CEO compensation reflects well on the board. . At first glance, therefore, Camtek appears to be a good quality growth stock. It is worth watching. And the risks? Every business has them, and we’ve spotted 1 warning sign for Camtek you should know.
Of course, you can (sometimes) buy stocks that are not growing income and not have insiders who buy stocks. But as a growth investor, I always like to check out companies that to do have these characteristics. You can access a free list of them here.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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