Excellence (WSE:EXC) Ticks All The Boxes When It Comes To Earnings Growth

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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Excellence (WSE:EXC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Excellence with the means to add long-term value to shareholders.

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Excellence's Improving Profits

Excellence has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Excellence's EPS has risen over the last 12 months, growing from zł0.053 to zł0.059. This amounts to a 11% gain; a figure that shareholders will be pleased to see.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While Excellence did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Check out our latest analysis for Excellence

Since Excellence is no giant, with a market capitalisation of zł52m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Excellence Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that Excellence insiders own a significant number of shares certainly is appealing. Indeed, with a collective holding of 56%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Although, with Excellence being valued at zł52m, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to zł29m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Excellence Deserve A Spot On Your Watchlist?

As previously touched on, Excellence is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. However, before you get too excited we've discovered 1 warning sign for Excellence that you should be aware of.

Although Excellence certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Polish companies that not only boast of strong growth but have strong insider backing.

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.