Here's Why We Think TerraVest Industries (TSE:TVK) Is Well Worth Watching
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like TerraVest Industries (TSE:TVK), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for TerraVest Industries
TerraVest Industries's Earnings Per Share Are Growing.
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). It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud TerraVest Industries's stratospheric annual EPS growth of 47%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.
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. TerraVest Industries's EBIT margins have actually improved by 5.3 percentage points in the last year, to reach 16%, but, on the flip side, revenue was down 12%. That's not ideal.
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 TerraVest Industries is no giant, with a market capitalization of CA$357m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are TerraVest Industries Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.
While TerraVest Industries insiders did net -CA$10m selling stock over the last year, they invested CA$10m, a much higher figure. You could argue that level of buying implies genuine confidence in the business. We also note that it was the Executive Chairman, Charles Pellerin, who made the biggest single acquisition, paying CA$8.4m for shares at about CA$16.78 each.
The good news, alongside the insider buying, for TerraVest Industries bulls is that insiders (collectively) have a meaningful investment in the stock. Given insiders own a small fortune of shares, currently valued at CA$117m, they have plenty of motivation to push the business to succeed. At 33% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Dustin Haw, is paid less than the median for similar sized companies. I discovered that the median total compensation for the CEOs of companies like TerraVest Industries with market caps between CA$125m and CA$499m is about CA$663k.
The TerraVest Industries CEO received total compensation of just CA$313k in the year to . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Is TerraVest Industries Worth Keeping An Eye On?
TerraVest Industries's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe TerraVest Industries deserves timely attention. Before you take the next step you should know about the 2 warning signs for TerraVest Industries that we have uncovered.
As a growth investor I do like to see insider buying. But TerraVest Industries 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.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
