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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Triad Group (LON:TRD). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Quickly Is Triad Group Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Triad Group managed to grow EPS by 8.2% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
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. Triad Group's EBIT margins have actually improved by 2.7 percentage points in the last year, to reach 6.5%, but, on the flip side, revenue was down 4.5%. That's not a good look.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
LSE:TRD Earnings and Revenue History November 7th 2022
Triad Group isn't a huge company, given its market capitalisation of UK£21m. That makes it extra important to check on its balance sheet strength.
Are Triad Group 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Despite some Triad Group insiders disposing of some shares, we note that there was UK£161k more in buying interest among those who know the company best Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. We also note that it was the Executive Chairman, John Rigg, who made the biggest single acquisition, paying UK£67k for shares at about UK£1.40 each.
And the insider buying isn't the only sign of alignment between shareholders and the board, since Triad Group insiders own more than a third of the company. To be exact, company insiders hold 90% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have UK£19m invested in the business, at the current share price. That's nothing to sneeze at!
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Adrian Leer is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations under UK£177m, like Triad Group, the median CEO pay is around UK£300k.
The Triad Group CEO received UK£211k in compensation for the year ending March 2022. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Does Triad Group Deserve A Spot On Your Watchlist?
One important encouraging feature of Triad Group is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. Even so, be aware that Triad Group is showing 3 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...
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
