Here's Why We Think Daldrup & Söhne (ETR:4DS) Might Deserve Your Attention 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.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
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 Daldrup & Söhne (ETR:4DS). 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.
View our latest analysis for Daldrup & Söhne
How Fast Is Daldrup & Söhne Growing Its Earnings Per Share?
In the last three years Daldrup & Söhne's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Daldrup & Söhne's EPS skyrocketed from €0.13 to €0.19, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 50%.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While Daldrup & Söhne may have maintained EBIT margins over the last year, revenue has fallen. This does not bode too well for short term growth prospects and so understanding the reasons for these results is of great importance.
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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Daldrup & Söhne.
Are Daldrup & Söhne Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So those who are interested in Daldrup & Söhne will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. In fact, they own 58% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. With that sort of holding, insiders have about €26m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!
Should You Add Daldrup & Söhne To Your Watchlist?
You can't deny that Daldrup & Söhne has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. What about risks? Every company has them, and we've spotted 2 warning signs for Daldrup & Söhne you should know about.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in DE with promising growth potential and insider confidence.
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.
