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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn’t suit, you might be more interested in profitable, growing companies, like Energy Services of America (NASDAQ:ESOA). While this doesn’t necessarily speak to whether it’s undervalued, the profitability of the business is enough to warrant some appreciation – especially if its growing.
View our latest analysis for Energy Services of America
In the last three years Energy Services of America’s earnings per share took off; so much so that it’s a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Energy Services of America’s EPS shot from US$0.56 to US$1.43, over the last year. It’s a rarity to see 155% year-on-year growth like that.
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. Energy Services of America maintained stable EBIT margins over the last year, all while growing revenue 8.4% to US$362m. That’s a real positive.
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.
NasdaqCM:ESOA Earnings and Revenue History March 16th 2025
Energy Services of America isn’t a huge company, given its market capitalisation of US$161m. That makes it extra important to check on its balance sheet strength.
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Energy Services of America followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have US$42m worth of shares. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 26% of the shares on issue for the business, an appreciable amount considering the market cap.
It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to Energy Services of America, with market caps between US$100m and US$400m, is around US$1.5m.
The CEO of Energy Services of America only received US$269k in total compensation for the year ending September 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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 a culture of integrity, in a broader sense.
Energy Services of America’s earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so the writing on the wall tells us that Energy Services of America is worth considering carefully. What about risks? Every company has them, and we’ve spotted 4 warning signs for Energy Services of America you should know about.
Although Energy Services of America 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 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.
