Here's Why We Think South Port New Zealand (NZSE:SPN) Might Deserve Your Attention Today
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 currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like South Port New Zealand (NZSE:SPN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide South Port New Zealand with the means to add long-term value to shareholders.
View our latest analysis for South Port New Zealand
How Quickly Is South Port New Zealand Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, South Port New Zealand has grown EPS by 9.4% per year. That growth rate is fairly good, assuming the company can keep it up.
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. The good news is that South Port New Zealand is growing revenues, and EBIT margins improved by 3.5 percentage points to 35%, over the last year. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
South Port New Zealand isn't a huge company, given its market capitalisation of NZ$230m. That makes it extra important to check on its balance sheet strength.
Are South Port New Zealand Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
One positive for South Port New Zealand, is that company insiders spent NZ$44k acquiring shares in the last year. While this investment may be modest, it is great considering the lack of insider selling.
Along with the insider buying, another encouraging sign for South Port New Zealand is that insiders, as a group, have a considerable shareholding. To be specific, they have NZ$26m worth of shares. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 11% of the shares on issue for the business, an appreciable amount considering the market cap.
Is South Port New Zealand Worth Keeping An Eye On?
One positive for South Port New Zealand is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. We don't want to rain on the parade too much, but we did also find 3 warning signs for South Port New Zealand (1 is a bit unpleasant!) that you need to be mindful of.
The good news is that South Port New Zealand is not the only growth stock with insider buying. Here's 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.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
