Do Scanship Holding's (OB:SSHIP) Earnings Warrant Your Attention?
Simply Wall St
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Scanship Holding (OB:SSHIP). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
In the last three years Scanship Holding's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Scanship Holding's EPS shot from øre0.13 to øre0.28, over the last year. You don't see 109% year-on-year growth like that, very often.
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. Scanship Holding maintained stable EBIT margins over the last year, all while growing revenue 33% to øre330m. That's progress.
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.
OB:SSHIP Income Statement, June 12th 2019
Scanship Holding isn't a huge company, given its market capitalization of øre1.3b. That makes it extra important to check on its balance sheet strength.
Are Scanship Holding Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We haven't seen any insiders selling Scanship Holding shares, in the last year. With that in mind, it's heartening that Henrik Badin, the Chief Executive Officer of the company, paid øre44k for shares at around øre5.16 each.
Along with the insider buying, another encouraging sign for Scanship Holding is that insiders, as a group, have a considerable shareholding. To be specific, they have øre428m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 33% of the company, demonstrating a degree of high-level alignment with shareholders.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. That's because on our analysis the CEO, Henrik Badin, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like Scanship Holding with market caps between øre865m and øre3.5b is about øre3.9m.
The Scanship Holding CEO received øre2.1m in compensation for the year ending December 2017. That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Scanship Holding To Your Watchlist?
Scanship Holding's earnings per share growth has been so hot recently that thinking about it is making me blush. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Scanship Holding may be at an inflection point. For those chasing fast growth, then, I'd suggest to stock merits monitoring. If you think Scanship Holding might suit your style as an investor, you could go straight to its annual report, or you could first check our discounted cash flow (DCF) valuation for the company.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
