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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Marco Polo Marine (SGX:5LY). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Marco Polo Marine
Marco Polo Marine's Improving Profits
In the last three years Marco Polo Marine's 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. So it would be better to isolate the growth rate over the last year for our analysis. Marco Polo Marine's EPS skyrocketed from S$0.0042 to S$0.0057, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 36%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of Marco Polo Marine shareholders is that EBIT margins have grown from 3.4% to 12% in the last 12 months and revenues are on an upwards trend as well. 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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Marco Polo Marine.
Are Marco Polo Marine 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The good news for Marco Polo Marine is that one insider has illustrated their belief in the company's future with a huge purchase of shares in the last 12 months. In one fell swoop, Executive Chairman Wan Tang Lee, spent S$4.0m, at a price of S$0.033 per share. It doesn't get much better than that, in terms of large investments from insiders.
On top of the insider buying, it's good to see that Marco Polo Marine insiders have a valuable investment in the business. Indeed, they hold S$23m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 14% of the company; visible skin in the game.
Should You Add Marco Polo Marine To Your Watchlist?
You can't deny that Marco Polo Marine has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. These things considered, this is one stock worth watching. It is worth noting though that we have found 3 warning signs for Marco Polo Marine (1 is a bit unpleasant!) that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Marco Polo Marine, 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.
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.
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