Do Stealth Global Holdings's (ASX:SGI) Earnings Warrant Your Attention?




  • In Business
  • 2021-10-22 02:36:09Z
  • By Simply Wall St.
 

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Stealth Global Holdings (ASX:SGI). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Stealth Global Holdings

How Fast Is Stealth Global Holdings Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Stealth Global Holdings grew its EPS from AU$0.001 to AU$0.0056, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.

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. The good news is that Stealth Global Holdings is growing revenues, and EBIT margins improved by 3.2 percentage points to 3.7%, 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.

Since Stealth Global Holdings is no giant, with a market capitalization of AU$15m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Stealth Global Holdings Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's good to see Stealth Global Holdings insiders walking the walk, by spending AU$885k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Narelle Edmunds who made the biggest single purchase, worth AU$239k, paying AU$0.17 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Stealth Global Holdings insiders own more than a third of the company. Actually, with 42% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only AU$15m Stealth Global Holdings is really small for a listed company. That means insiders only have AU$6.4m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Is Stealth Global Holdings Worth Keeping An Eye On?

Stealth Global Holdings's earnings have taken off like any random crypto-currency did, back in 2017. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Stealth Global Holdings deserves timely attention. We should say that we've discovered 5 warning signs for Stealth Global Holdings that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Stealth Global Holdings, you'll probably love this free list of growing companies that insiders are buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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