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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. 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. 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.
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 Singapore Shipping (SGX:S19). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Singapore Shipping with the means to add long-term value to shareholders.
See our latest analysis for Singapore Shipping
Singapore Shipping's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Singapore Shipping has grown EPS by 9.3% per year. That's a pretty good rate, if the company can sustain it.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins have declined for Singapore Shipping, but revenue stability should provide some reassurance to shareholders. That doesn't inspire a great deal of confidence.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Singapore Shipping isn't a huge company, given its market capitalisation of S$100m. That makes it extra important to check on its balance sheet strength.
Are Singapore Shipping Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The first bit of good news is that no Singapore Shipping insiders reported share sales in the last twelve months. Even better, though, is that the Executive Chairman, Chio Kiat Ow, bought a whopping US$276k worth of shares, paying about US$0.24 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.