Do Dundee Precious Metals's (TSE:DPM) Earnings Warrant Your Attention?
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In contrast to all that, I prefer to spend time on companies like Dundee Precious Metals (TSE:DPM), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
View our latest analysis for Dundee Precious Metals
Dundee Precious Metals's Improving Profits
In the last three years Dundee Precious Metals's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Dundee Precious Metals's EPS shot from US$0.35 to US$0.99, over the last year. You don't see 186% year-on-year growth like that, very often.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Dundee Precious Metals is growing revenues, and EBIT margins improved by 3.2 percentage points to 37%, over the last year. 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. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Dundee Precious Metals's forecast profits?
Are Dundee Precious Metals Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Dundee Precious Metals insiders both bought and sold shares over the last twelve months, but they did end up spending US$24k more on stock than they received from selling it. So, on balance, the insider transactions are mildly encouraging. We also note that it was the President, David Rae, who made the biggest single acquisition, paying CA$197k for shares at about CA$7.89 each.
Does Dundee Precious Metals Deserve A Spot On Your Watchlist?
Dundee Precious Metals's earnings per share have taken off like a rocket aimed right at the moon. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. For me, this situation certainly piques my interest. You still need to take note of risks, for example - Dundee Precious Metals has 3 warning signs we think you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Dundee Precious Metals, 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.
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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.
