Here's Why We Think Perma-Pipe International Holdings (NASDAQ:PPIH) Is Well Worth Watching
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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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 Perma-Pipe International Holdings (NASDAQ:PPIH). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for Perma-Pipe International Holdings
How Fast Is Perma-Pipe International Holdings Growing Its Earnings Per Share?
In the last three years Perma-Pipe International Holdings' 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. So it would be better to isolate the growth rate over the last year for our analysis. Over the last year, Perma-Pipe International Holdings increased its EPS from US$0.56 to US$0.60. That's a modest gain of 7.9%.
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. Despite consistency in EBIT margins year on year, Perma-Pipe International Holdings has actually recorded a dip in revenue. 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. For finer detail, click on the image.
Since Perma-Pipe International Holdings is no giant, with a market capitalisation of US$66m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Perma-Pipe International Holdings Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
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 more importantly, Independent Director Robert McNally spent US$50k acquiring shares, doing so at an average price of US$8.36. Strong buying like that could be a sign of opportunity.
Is Perma-Pipe International Holdings Worth Keeping An Eye On?
One important encouraging feature of Perma-Pipe International Holdings is that it is growing profits. While some companies are struggling to grow EPS, Perma-Pipe International Holdings seems free from that morose affliction. Despite there being a solitary insider adding to their holdings, it's enough to consider adding this to the watchlist. It is worth noting though that we have found 1 warning sign for Perma-Pipe International Holdings that you need to take into consideration.
Keen growth investors love to see insider buying. Thankfully, Perma-Pipe International 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.
