Is Now The Time To Put Shine Justice (ASX:SHJ) On Your Watchlist?
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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Shine Justice (ASX:SHJ). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Shine Justice with the means to add long-term value to shareholders.
View our latest analysis for Shine Justice
How Quickly Is Shine Justice Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Shine Justice has managed to grow EPS by 30% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. While we note Shine Justice achieved similar EBIT margins to last year, revenue grew by a solid 15% to AU$215m. That's a real positive.
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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Shine Justice.
Are Shine Justice 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.
It's good to see Shine Justice insiders walking the walk, by spending AU$456k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. Zooming in, we can see that the biggest insider purchase was by Co-Founder Simon Morrison for AU$371k worth of shares, at about AU$1.35 per share.
On top of the insider buying, we can also see that Shine Justice insiders own a large chunk of the company. In fact, they own 52% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have AU$107m invested in the business, at the current share price. That's nothing to sneeze at!
Is Shine Justice Worth Keeping An Eye On?
If you believe that share price follows earnings per share you should definitely be delving further into Shine Justice's strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. Astute investors will want to keep this stock on watch. We should say that we've discovered 1 warning sign for Shine Justice that you should be aware of before investing here.
The good news is that Shine Justice 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.
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