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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Computer Task Group (NASDAQ:CTG). 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.
View our latest analysis for Computer Task Group
How Fast Is Computer Task Group Growing Its Earnings Per Share?
In the last three years Computer Task Group's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, Computer Task Group's EPS soared from US$0.59 to US$0.94, in just one year. That's a commendable gain of 60%.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Computer Task Group maintained stable EBIT margins over the last year, all while growing revenue 2.2% to US$385m. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Computer Task Group isn't a huge company, given its market capitalization of US$132m. That makes it extra important to check on its balance sheet strength.
Are Computer Task Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Computer Task Group top brass are certainly in sync, not having sold any shares, over the last year. But my excitement comes from the US$87k that Independent Chairman James Helvey spent buying shares (at an average price of about US$8.71).
Should You Add Computer Task Group To Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Computer Task Group's strong EPS growth. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. So on this analysis I believe Computer Task Group is probably worth spending some time on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Computer Task Group , and understanding this should be part of your investment process.