Here’s why Cabot (NYSE:CBT) has caught investors’ attention

Investors are often driven by the idea of ​​discovering “the next big thing,” even if that means buying “historic stocks” without any income, let alone profit. Sometimes these stories can cloud investors’ minds, leading them to invest with their emotions rather than based on the company’s sound fundamentals. Loss-making companies can act as a sponge for capital. Investors should therefore be careful not to waste money after losing it.

So if this idea of ​​high risk and high reward doesn’t suit you, you might be more interested in profitable, growing businesses, like Pooch (NYSE:CBT). This is not to say that the business presents the best investment opportunity, but profitability is a key element of business success.

Check out our latest analysis for Cabot

Cabot improves profits

Over the past three years, Cabot’s earnings per share have taken off; so much so that it’s a bit misleading to use these numbers to try to derive long-term estimates. As a result, we will instead focus on last year’s growth. To the delight of shareholders, Cabot’s EPS increased from US$6.17 to US$7.81 over the last year. This represents a commendable gain of 27%.

A close look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. Although Cabot was able to maintain its EBIT margins over the past year, revenues fell. While this may raise concerns, investors should investigate the reasons behind this.

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

NYSE: CBT Earnings and Revenue History as of May 7, 2024

Fortunately, we have access to analyst forecasts for Cabot’s plan. future profits. You can make your own predictions without looking, or you can take a look at what the professionals are predicting.

Are Cabot insiders aligned with all shareholders?

We wouldn’t expect to see insiders owning a significant percentage of a $5.3b company like Cabot. But thanks to their investment in the company, it’s nice to see that there are still incentives to align their actions with those of shareholders. Since insiders own a significant portion of the shares, currently valued at $68 million, they have all the motivation to push the company to succeed. This should keep them focused on creating long-term shareholder value.

Does Cabot deserve a spot on your watchlist?

For growth investors, Cabot’s gross earnings growth rate is a beacon in the night. With EPS growth rates like that, it’s not surprising to see the company’s executives place their trust in the company by continuing to hold a significant investment. On all its merits, solid EPS growth and shareholder-aligned company insiders would indicate that a company is worth further research. However, you should always think about the risks. For example, we spotted 2 warning signs for Cabot you should be aware of this.

While Cabot certainly looks good, it could attract more investors if insiders bought shares. If you like seeing companies engage in insider buying, check out this hand-picked selection of companies that not only boast strong growth, but have also experienced insider buying recently.

Please note that the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

The assessment is complex, but we help to simplify it.

Find out if Cabot is potentially overvalued or undervalued by checking out our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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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 constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term 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 stocks mentioned.