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Is Now The Time To Put Sylvania Platinum (LON:SLP) On Your Watchlist?

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·4 min read
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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 completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Sylvania Platinum (LON:SLP). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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 Sylvania Platinum

How Fast Is Sylvania Platinum Growing Its Earnings Per Share?

Over the last three years, Sylvania Platinum has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a falcon taking flight, Sylvania Platinum's EPS soared from US$0.21 to US$0.31, over the last year. That's a impressive gain of 47%.

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). Sylvania Platinum shareholders can take confidence from the fact that EBIT margins are up from 56% to 62%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
earnings-and-revenue-history

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Sylvania Platinum?

Are Sylvania Platinum 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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Sylvania Platinum insiders both bought and sold shares over the last twelve months, but they did end up spending US$36k more on stock than they received from selling it. When you weigh that up, it is a mild positive, indicating increased alignment between shareholders and management.

It's reassuring that Sylvania Platinum insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. I refer to the very reasonable level of CEO pay. I discovered that the median total compensation for the CEOs of companies like Sylvania Platinum with market caps between US$200m and US$800m is about US$1.0m.

The Sylvania Platinum CEO received total compensation of just US$456k in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Sylvania Platinum Deserve A Spot On Your Watchlist?

You can't deny that Sylvania Platinum has grown its earnings per share at a very impressive rate. That's attractive. And that's not the only positive, either. We have both insider buying and reasonable and remuneration to consider. On balance the message seems to be that this stock is worth looking at, at least for a while. Even so, be aware that Sylvania Platinum is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Sylvania Platinum, you'll probably love this free list of growing companies that insiders are buying.

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.