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Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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 Cache Logistics Trust (SGX:K2LU). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Fast Is Cache Logistics Trust Growing Its Earnings Per Share?
Over the last three years, Cache Logistics Trust has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Cache Logistics Trust boosted its trailing twelve month EPS from S$0.022 to S$0.026, in the last year. I doubt many would complain about that 22% gain.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While Cache Logistics Trust did well to grow revenue over the last year, EBIT margins were dampened at the same time. So it seems the future my hold further growth, especially if EBIT margins can stabilize.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Cache Logistics Trust's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Cache Logistics Trust 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Like a sturdy phalanx Cache Logistics Trust insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Chairman of the Board at ARA Trust Management (Cache) Limited, How Teck Lim, paid S$148k to buy shares at an average price of S$0.74.
Does Cache Logistics Trust Deserve A Spot On Your Watchlist?
One important encouraging feature of Cache Logistics Trust is that it is growing profits. Not every business can grow its EPS, but Cache Logistics Trust certainly can. The icing on the cake is that an insider bought shares during the year, which inclines me to put this one on a watchlist. Of course, just because Cache Logistics Trust is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
The good news is that Cache Logistics Trust is not the only growth stock with insider buying. Here's a 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
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 firstname.lastname@example.org. 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.