It’s common for many investors, especially inexperienced ones, to buy stocks in companies with good histories, even when those companies are making losses. But like Peter Lynch said One up on Wall Street, ‘Long shots almost never pay off.’ While a well-financed company can suffer losses for years, eventually it must turn a profit or investors will move on and the company will wither.
If this type of business isn’t your style, you like businesses that generate revenue and even make a profit, then you might be interested in this socket mobile (NASDAQ:SCKT). While profit isn’t the only metric to consider when investing, it’s worth recognizing companies that can consistently produce it.
Check out our latest analysis for Socket Mobile
Improving Socket Mobile’s profits
Strong earnings per share (EPS) is an indicator that a company is making solid earnings, which investors take positively, and as such, the stock price tends to reflect good EPS performance. This is why EPS growth is viewed so positively. It’s impressive that Socket Mobile’s EPS went from $0.049 to $0.27 in just one year. While it’s difficult to sustain growth at this level, it bodes well for the company’s future prospects. This could indicate that the business is reaching an inflection point.
One way to check a company’s growth is to look at how its earnings and profit margins before interest and taxes (EBIT) are changing. While we can see that Socket Mobile delivered similar EBIT margins to last year, revenue grew a solid 27% to $25 million. That’s really positive.
The chart below shows how the company’s profits and earnings have evolved over time. To see the actual numbers, click on the chart.
Since Socket Mobile isn’t a giant with a market cap of $18 million, be sure to check its cash and debt before getting too excited about his prospects.
Are Socket Mobile Insiders Agree With All Shareholders?
Investors are always looking for a vote of confidence in the companies they hold, and insider buying is one of the key indicators of optimism in the market. Because insider buying often indicates that those closest to the company have confidence that the stock price will do well. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
We haven’t seen any insiders sell Socket Mobile stock over the past year. With that in mind, it is encouraging that Charlie Bass, the company’s independent chief executive officer, paid $35,000 for shares priced at approximately $3.55 each. It seems at least one insider is ready to show the market that Socket Mobile has potential.
It’s commendable to see insiders buying Socket Mobile stock, but there’s more evidence of shareholder-friendly management. The CEO in particular is fairly well paid for a company of this size. For companies with a market cap of less than $200 million, like Socket Mobile, the average CEO salary is around $768,000.
The Socket Mobile CEO took home a total compensation package worth $480,000 in the year leading up to December 2021. That’s actually below the median for CEOs of similar-sized companies. CEO pay is hardly the most important aspect of a company to consider, but when it’s reasonable, it gives a little more confidence that leadership has shareholder interests in mind. It can also be a sign of good governance in general.
Does Socket Mobile deserve a spot on your watch list?
Socket Mobile’s earnings per share have skyrocketed at sky-high growth rates. Better still, we’re seeing insider buying and the CEO’s pay seems reasonable. Strong EPS growth suggests Socket Mobile could be at an inflection point. For those attracted to rapid growth, we’d suggest this stock deserves a watch. However, it is worth noting that we found 2 warning signs for Socket Mobile (1 cannot be ignored!) that you must take into account.
There are many other companies where insiders buy stock. So if you like the sound of Socket Mobile, you’ll probably love this free List of growing companies that insiders are buying.
Please note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Do you have any feedback about this article? Concerned about the content? Get in touch directly with us. Alternatively, send an email to the editorial team (at) simplywallst.com.
This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
The assessment is complex, but we help to simplify it.
find out if socket mobile may be over or under rated by reviewing our comprehensive analysis which includes the following Fair Value Estimates, Risks and Warnings, Dividends, Insider Trading and Financial Health.
Check out the free analysis