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 currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Grand Venture Technology (SGX:JLB). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Grand Venture Technology with the means to add long-term value to shareholders.
Grand Venture Technology's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Grand Venture Technology's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 41%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. While we note Grand Venture Technology achieved similar EBIT margins to last year, revenue grew by a solid 47% to S$130m. That's progress.
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.
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 Grand Venture Technology.
Are Grand Venture Technology Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We note that Grand Venture Technology insiders spent S$76k on stock, over the last year; in contrast, we didn't see any selling. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. We also note that it was the Executive Deputy Chairman, Tiam Nam Lee, who made the biggest single acquisition, paying S$20k for shares at about S$0.50 each.
On top of the insider buying, it's good to see that Grand Venture Technology insiders have a valuable investment in the business. To be specific, they have S$64m worth of shares. This considerable investment should help drive long-term value in the business. Those holdings account for over 33% of the company; visible skin in the game.
Does Grand Venture Technology Deserve A Spot On Your Watchlist?
Grand Venture Technology's earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Grand Venture Technology deserves timely attention. It is worth noting though that we have found 2 warning signs for Grand Venture Technology (1 doesn't sit too well with us!) that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Grand Venture Technology, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here