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 Wulff-Yhtiöt Oyj (HEL:WUF1V), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Wulff-Yhtiöt Oyj's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Wulff-Yhtiöt Oyj's EPS has grown 25% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Wulff-Yhtiöt Oyj reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Wulff-Yhtiöt Oyj is no giant, with a market capitalization of €11m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Wulff-Yhtiöt Oyj Insiders Aligned With All Shareholders?
Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Wulff-Yhtiöt Oyj insiders own a meaningful share of the business. Indeed, with a collective holding of 58%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only €11m Wulff-Yhtiöt Oyj is really small for a listed company. That means insiders only have €6.5m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!
Does Wulff-Yhtiöt Oyj Deserve A Spot On Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Wulff-Yhtiöt Oyj's strong EPS growth. Further, the high level of insider buying impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Of course, just because Wulff-Yhtiöt Oyj is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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
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