We Ran A Stock Scan For Earnings Growth And Art's-Way Manufacturing (NASDAQ:ARTW) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Art's-Way Manufacturing (NASDAQ:ARTW). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Art's-Way Manufacturing

How Fast Is Art's-Way Manufacturing Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Art's-Way Manufacturing grew its EPS from US$0.027 to US$0.17, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Art's-Way Manufacturing shareholders is that EBIT margins have grown from 1.8% to 4.3% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Art's-Way Manufacturing isn't a huge company, given its market capitalisation of US$13m. That makes it extra important to check on its balance sheet strength.

Are Art's-Way Manufacturing Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Art's-Way Manufacturing shareholders is that no insiders reported selling shares in the last year. Add in the fact that Randall Ramsey, the Independent Director of the company, paid US$37k for shares at around US$2.26 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

It's reassuring that Art's-Way Manufacturing insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations under US$200m, like Art's-Way Manufacturing, the median CEO pay is around US$766k.

The Art's-Way Manufacturing CEO received US$425k in compensation for the year ending November 2022. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.

Is Art's-Way Manufacturing Worth Keeping An Eye On?

Art's-Way Manufacturing's earnings per share growth have been climbing higher at an appreciable rate. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Art's-Way Manufacturing may be at an inflection point. For those attracted to fast growth, we'd suggest this stock merits monitoring. It is worth noting though that we have found 3 warning signs for Art's-Way Manufacturing (1 is a bit unpleasant!) that you need to take into consideration.

The good news is that Art's-Way Manufacturing is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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.

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