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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Stamford Tyres (SGX:S29). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Stamford Tyres
How Fast Is Stamford Tyres Growing Its Earnings Per Share?
In the last three years Stamford Tyres' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. Over the last year, Stamford Tyres increased its EPS from S$0.016 to S$0.017. That amounts to a small improvement of 6.8%.
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. Our analysis has highlighted that Stamford Tyres' revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Stamford Tyres reported flat revenue and EBIT margins over the last year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Stamford Tyres isn't a huge company, given its market capitalisation of S$46m. That makes it extra important to check on its balance sheet strength.
Are Stamford Tyres Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that Stamford Tyres insiders own a significant number of shares certainly is appealing. Owning 43% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Valued at only S$46m Stamford Tyres is really small for a listed company. That means insiders only have S$20m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!