Do Energy Services of America (NASDAQ:ESOA) earnings warrant your attention?

For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it completely lacks a track record of revenue and earnings. But as Peter Lynch said in One Up on Wall Street“Long shots almost never pay off.”

If, on the other hand, you like businesses that generate revenue and even profit, then you might be interested in Energy Services of America (NASDAQ: ESOA). Now, I’m not saying the stock is necessarily undervalued today; but I can’t help but appreciate the profitability of the business itself. While a well-funded business may suffer losses for years, unless its owners have an endless appetite to subsidize the customer, it will eventually have to turn a profit, or else breathe its last breath.

Check out our latest analysis for Energy Services of America

How fast is Energy Services of America growing earnings per share?

If you think markets are even remotely efficient, you expect a company’s share price to follow its earnings per share (EPS) over the long term. This means EPS growth is seen as a real benefit by most successful long-term investors. For my part, I am blown away by the fact that Energy Services of America has increased EPS by 52% annually over the past three years. This kind of growth never lasts long, but like a shooting star, it’s worth watching when it happens.

I like to take a look at earnings before interest and tax margins (EBIT), as well as revenue growth, to get another view of the quality of the company’s growth. Energy Services of America maintained stable EBIT margins over the past year, while growing revenue 6.2% to $133 million. It is progress.

The chart below shows how the company’s top and bottom line has grown over time. For more details, click on the image.

NasdaqCM: ESOA Earnings and Revenue History May 4, 2022

Since Energy Services of America is not a giant, with a market capitalization of $41 million, you should definitely check its cash and debt. before getting too excited about his prospects.

Are Energy Services of America insiders aligned with all shareholders?

Many consider high insider shareholding to be a strong sign of alignment between a company’s executives and ordinary shareholders. So, as you can imagine, the fact that Energy Services of America insiders hold a significant amount of stock certainly appeals to me. In fact, they own 49% of the shares, making insiders a very influential group of shareholders. I’m always reassured by strong insider ownership like this, because it implies that those running the company are genuinely motivated to create shareholder value. With this type of holding, insiders have approximately US$20 million in the stock, at current prices. It is not to be despised!

It’s good to see that insiders are invested in the company, but are the compensation levels reasonable? A brief analysis of CEO compensation suggests they are. For companies with a market capitalization of less than $200 million, such as Energy Services of America, the median CEO salary is around $724,000.

The CEO of Energy Services of America received total compensation of just US$133,000 during the year at . This is clearly well below average, so at first glance this arrangement seems generous to shareholders and indicates a modest compensation culture. CEO compensation isn’t the most important aspect of a company to consider, but when it’s reasonable, it gives me a bit more confidence that executives are looking out for shareholders’ interests. It can also be a sign of a culture of integrity, broadly defined.

Does Energy Services of America deserve a spot on your watch list?

Energy Services of America’s earnings per share growth rose like a mountain goat climbing the Alps. The icing on the cake is that insiders own a bunch of stock, and the CEO salary really seems quite reasonable. The sharp rise in earnings could signal good business momentum. Strong growth can make for big winners, so I think Energy Services of America deserves careful consideration. Before proceeding to the next step, you must know the 4 warning signs for Energy Services of America (1 makes us a little uncomfortable!) that we discovered.

Although Energy Services of America looks good to me, I would rather have insiders buying stocks. If you also like to see insiders buy, then this free list of growing companies that insiders are buying might be exactly what you are looking for.

Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.