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I Ran A Stock Scan For Earnings Growth And Citi Trends (NASDAQ:CTRN) Passed With Ease

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.

In contrast to all that, I prefer to spend time on companies like Citi Trends (NASDAQ:CTRN), which has not only revenues, but also profits. While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. 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. Citi Trends’s Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that Citi Trends’s EPS went from US$0.65 to US$7.68 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. The good news is that Citi Trends is growing revenues, and EBIT margins improved by 7.9 percentage points to 9.1%, over the last year. That’s great to see, on both counts.

You can take a look at the company’s revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers. NasdaqGS:CTRN Earnings and Revenue History November 1st 2021 Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Citi Trends . Are Citi Trends Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I’m encouraged by the fact that insiders own Citi Trends shares worth a considerable sum. To be specific, they have US$31m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that’s only about 4.5% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders. Is Citi Trends Worth Keeping An Eye On?

Citi Trends’s earnings per share growth have been levitating higher, like a mountain goat scaling the […]

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