The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Standrew (WSE:STD). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Standrew
Standrew’s Improving Profits
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Standrew grew its EPS from zł0.21 to zł0.71, in one short year. While it’s difficult to sustain growth at that level, it bodes well for the company’s outlook for the future. This could point to the business hitting a point of inflection.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it’s a great way for a company to maintain a competitive advantage in the market. Standrew shareholders can take confidence from the fact that EBIT margins are up from 4.0% to 9.4%, and revenue is growing. 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. For finer detail, click on the image.
WSE:STD Earnings and Revenue History July 6th 2022
Standrew isn’t a huge company, given its market capitalisation of zł11m. That makes it extra important to check on its balance sheet strength.
Are Standrew Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we’re pleased to report that Standrew insiders own a meaningful share of the business. Indeed, with a collective holding of 83%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, Standrew is a very small company, with a market cap of only zł11m. So despite a large proportional holding, insiders only have zł9.3m worth of stock. That’s not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.
Is Standrew Worth Keeping An Eye On?
Standrew’s earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there’s a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching Standrew very closely. You still need to take note of risks, for example – Standrew has 4 warning signs (and 1 which shouldn’t be ignored) we think you should know about.
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
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.
Discovered on: 2022-07-06 04:13:40
Source: Does Standrew (WSE:STD) Deserve A Spot On Your Watchlist?
