Should You Be Adding Total Energy Services (TSE:TOT) To Your Watchlist Today?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Total Energy Services (TSE:TOT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Total Energy Services with the means to add long-term value to shareholders.
Check out our latest analysis for Total Energy Services
How Fast Is Total Energy Services Growing Its Earnings Per Share?
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. It's an outstanding feat for Total Energy Services to have grown EPS from CA$0.13 to CA$1.48 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. Could this be a sign that the business has reached an inflection point?
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. Total Energy Services shareholders can take confidence from the fact that EBIT margins are up from -1.5% to 9.2%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Total Energy Services' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
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. 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.
While Total Energy Services insiders did net CA$520k selling stock over the last year, they invested CA$1.6m, a much higher figure. You could argue that level of buying implies genuine confidence in the business. Zooming in, we can see that the biggest insider purchase was by President Daniel Halyk for CA$159k worth of shares, at about CA$8.26 per share.
The good news, alongside the insider buying, for Total Energy Services bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold CA$26m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 7.6% of the company; visible skin in the game.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Dan Halyk, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Total Energy Services, with market caps between CA$133m and CA$533m, is around CA$1.1m.
Total Energy Services offered total compensation worth CA$730k to its CEO in the year to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add Total Energy Services To Your Watchlist?
Total Energy Services' earnings have taken off in quite an impressive fashion. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. 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. We should say that we've discovered 1 warning sign for Total Energy Services that you should be aware of before investing here.
The good news is that Total Energy Services is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!
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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