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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. 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 Union Steel Holdings (SGX:ZB9). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Union Steel Holdings with the means to add long-term value to shareholders.
Check out our latest analysis for Union Steel Holdings
How Fast Is Union Steel Holdings 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. Recognition must be given to the that Union Steel Holdings has grown EPS by 47% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
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. While we note Union Steel Holdings achieved similar EBIT margins to last year, revenue grew by a solid 14% to S$108m. That's a real positive.
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.
Since Union Steel Holdings is no giant, with a market capitalisation of S$81m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Union Steel Holdings 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.
One shining light for Union Steel Holdings is the serious outlay one insider has made to buy shares, in the last year. In one fell swoop, Co-Founder & Executive Director Yew Ang, spent S$603m, at a price of S$20,100 per share. It doesn't get much better than that, in terms of large investments from insiders.