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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Total Energy Services (TSE:TOT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Fast Is Total Energy Services Growing Its Earnings Per Share?
Total Energy Services has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, Total Energy Services' EPS grew from CA$0.63 to CA$1.54, over the previous 12 months. It's not often a company can achieve year-on-year growth of 145%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
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. The good news is that Total Energy Services is growing revenues, and EBIT margins improved by 4.1 percentage points to 8.9%, over the last year. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
TSX:TOT Earnings and Revenue History November 22nd 2023
Are Total Energy Services 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Despite CA$257k worth of sales, Total Energy Services insiders have overwhelmingly been buying the stock, spending CA$795k on purchases in the last twelve months. An optimistic sign for those with Total Energy Services in their watchlist. It is also worth noting that it was President Daniel Halyk who made the biggest single purchase, worth CA$153k, paying CA$8.37 per share.
On top of the insider buying, it's good to see that Total Energy Services insiders have a valuable investment in the business. Indeed, they hold CA$26m worth of its stock. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 7.9% of the shares on issue for the business, an appreciable amount considering the market cap.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, Dan Halyk is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Total Energy Services with market caps between CA$137m and CA$548m is about CA$1.0m.
The Total Energy Services CEO received CA$730k in compensation for the year ending December 2022. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.
Should You Add Total Energy Services To Your Watchlist?
Total Energy Services' earnings per share growth have been climbing higher at an appreciable rate. 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 Total Energy Services deserves timely attention. However, before you get too excited we've discovered 1 warning sign for Total Energy Services that you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Total Energy Services, you'll probably love this freelist of growing companies that insiders are buying.
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.
