Here's Why We Think Tandy Leather Factory (NASDAQ:TLF) Might Deserve Your Attention Today
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Tandy Leather Factory (NASDAQ:TLF). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Tandy Leather Factory
How Fast Is Tandy Leather Factory Growing Its Earnings Per Share?
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Tandy Leather Factory's EPS went from US$0.015 to US$0.28 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.
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. We note that while EBIT margins have improved from 1.4% to 3.9%, the company has actually reported a fall in revenue by 2.9%. That falls short of ideal.
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.
Tandy Leather Factory isn't a huge company, given its market capitalisation of US$35m. That makes it extra important to check on its balance sheet strength.
Are Tandy Leather Factory Insiders Aligned With All Shareholders?
Prior to investment, it's always a good idea to check that the management team is paid reasonably. Pay levels around or below the median, can be a sign that shareholder interests are well considered. Our analysis has discovered that the median total compensation for the CEOs of companies like Tandy Leather Factory with market caps under US$200m is about US$756k.
Tandy Leather Factory offered total compensation worth US$663k to its CEO in the year to December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Is Tandy Leather Factory Worth Keeping An Eye On?
Tandy Leather Factory's earnings have taken off in quite an impressive fashion. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. At the same time the reasonable CEO compensation reflects well on the board of directors. So faced with these facts, it seems that researching this stock a little more may lead you to discover an investment opportunity that meets your quality standards. Still, you should learn about the 2 warning signs we've spotted with Tandy Leather Factory (including 1 which shouldn't be ignored).
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.
