Investing in companies with the potential to reverse their fortunes can be enticing for speculators. However, these high-risk investments often come with little probability of payoff, ultimately leading investors to learn a costly lesson. On the other hand, some investors prefer to focus on companies like CSP (NASDAQ:CSPI) that not only have revenues but are also profitable. Profitability is a crucial component for success in business.
CSP has shown impressive improvement in its earnings per share (EPS), which indicates solid profits and is viewed favorably by investors. In just one year, CSP’s EPS grew from US$0.18 to US$1.04, suggesting positive prospects for the company. This rapid growth could indicate that CSP has reached an inflection point in its business.
Top-line growth and an increasing earnings before interest and taxation (EBIT) margin demonstrate sustainable growth and a competitive advantage for CSP in the market. EBIT margins have improved from -1.6% to 3.8%, accompanied by revenue growth. These positive indicators bode well for the company’s future.
While CSP is not a giant in the market with a market capitalization of US$104m, it is essential to consider its cash and debt positions before becoming too optimistic about its prospects.
Insider buying in a company often suggests that those closest to the company have confidence in its potential. In the case of CSP, there has been a significant acquisition of shares by Joseph Nerges, a company insider, totaling a staggering US$1.3m. Additionally, insiders collectively hold shares valued at US$30m, accounting for 29% of the company. This high-level alignment with shareholders is an encouraging sign.
Considering CSP’s impressive earnings growth and insider buying, it appears that the company has reached a turning point and deserves attention from investors. While it’s important to note the warning signs and conduct further analysis, CSP could be worth adding to your watchlist.
Source: Simply Wall St