Should You Be Adding Tristel (LON:TSTL) 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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Tristel (LON:TSTL). 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.
Check out our latest analysis for Tristel
How Quickly Is Tristel Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. We can see that in the last three years Tristel grew its EPS by 8.2% per year. That's a pretty good rate, if the company can sustain it.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. EBIT margins for Tristel remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 18% to UK£39m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Tristel's future profits.
Are Tristel Insiders Aligned With All Shareholders?
As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. Our analysis has discovered that the median total compensation for the CEOs of companies like Tristel with market caps between UK£79m and UK£315m is about UK£579k.
Tristel offered total compensation worth UK£450k to its CEO in the year to June 2023. That is actually below the median for CEO's of similarly sized companies. 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 Tristel Deserve A Spot On Your Watchlist?
One positive for Tristel is that it is growing EPS. That's nice to see. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So based on its merits, the stock deserves further research, if not an addition to your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Tristel you should be aware of.
Although Tristel certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of British companies that not only boast of strong growth but have also seen recent insider buying..
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.
