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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like UMS Holdings (SGX:558). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Quickly Is UMS Holdings Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that UMS Holdings has grown EPS by 37% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.
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. EBIT margins for UMS Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 57% to S$359m. That's progress.
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.
Fortunately, we've got access to analyst forecasts of UMS Holdings' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are UMS Holdings 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the S$82k that Group Financial Controller Meng Chong Loh spent buying shares (at an average price of about S$1.09). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.
On top of the insider buying, it's good to see that UMS Holdings insiders have a valuable investment in the business. Notably, they have an enviable stake in the company, worth S$150m. Coming in at 18% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Looking very optimistic for investors.
Should You Add UMS Holdings To Your Watchlist?
UMS Holdings' earnings per share have been soaring, with growth rates sky high. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe UMS Holdings deserves timely attention. We should say that we've discovered 1 warning sign for UMS Holdings that you should be aware of before investing here.
Keen growth investors love to see insider buying. Thankfully, UMS Holdings isn't the only one. You can see a a free list of them here.
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.
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