It’s only natural that many investors, especially those new to the game, would rather buy “hot” stocks with a good story, even if those companies are losing money. Unfortunately, high-risk investments are often unlikely to pay off, and many investors pay a price to learn their lesson.
Contrary to all this, I prefer to spend time on companies like ERG Spólka Akcyjna (WSE: ERG), which not only has revenues, but also profits. While that doesn’t make stocks worth buying at all costs, you can’t deny that successful capitalism ultimately requires profits. Conversely, a loss-making company has yet to prove itself with profit, and eventually the sweet milk of external capital can turn sour.
See our latest review for ERG Spólka Akcyjna
How fast is ERG Spólka Akcyjna increasing its earnings per share?
The market is a short-term voting machine, but a long-term weighing machine, so the stock price eventually follows earnings per share (EPS). So it’s no surprise that I like to invest in companies with growing EPS. We can see that over the past three years ERG Spólka Akcyjna has increased its EPS by 8.8% per year. That’s a pretty good rate, if the company can keep it up.
One way to check how a business is growing is to look at how its income and profit before interest and tax (EBIT) have changed. ERG Spólka Akcyjna’s EBIT margins actually improved by 2.2 percentage points last year, to 4.2%, but, on the other hand, revenue fell by 4. 9%. It is far from ideal.
In the graph below, you can see how the business has increased its profit and revenue over time. To see the actual numbers, click on the graph.
Since ERG Spólka Akcyjna is not a giant, with a market cap of Z33million, so you should definitely check its cash flow and debt. before too excited about his prospects.
Are ERG Spólka Akcyjna insiders aligned with all shareholders?
High insider ownership is seen by many as a strong sign of alignment between a company’s executives and common shareholders. So, as you can imagine, the fact that ERG Spólka Akcyjna insiders own a significant number of shares certainly appeals to me. Indeed, with a collective participation of 52%, the insiders of the company control and have a lot of capital behind the company. For me, this is a good sign because it suggests that they will be motivated to create shareholder value over the long term. Valued at only 33 million zł. ERG Spólka Akcyjna is really small for a listed company. Thus, despite a large proportional stake, insiders only have 17 million z shares. It might not be a huge sum, but it should be enough to keep insiders motivated!
It means a lot to see insiders investing in the company, but I wonder if the compensation policies are shareholder friendly. Well, based on CEO pay, I would say they are indeed. For companies with a market capitalization of less than 735 million zł, such as ERG Spólka Akcyjna, the median CEO salary is around 536 kz.
ERG CEO Spólka Akcyjna received only 245,000 z of total compensation for the year ended. It seems to me a modest remuneration and can imply a certain respect for the interests of the shareholders. CEO compensation isn’t the most important aspect of a business to consider, but when it’s reasonable, it gives me a little more confidence that leaders are looking out for the interests of shareholders. I would also say that reasonable pay levels are a testament to good decision making more generally.
Is ERG Spólka Akcyjna worth watching?
An important and encouraging feature of ERG Spólka Akcyjna is profit growth. Profit growth may be ERG Spólka Akcyjna’s main game, but the fun do not stop there. With a significant level of insider ownership and reasonable CEO compensation, a reasonable mind might conclude that this is a stock to watch. We should say that we found out 2 warning signs for ERG Spólka Akcyjna which you should know before investing here.
While ERG Spólka Akcyjna certainly looks good to me, I would like more insiders to buy stocks. If you also like to see insider buying then this free list of growing companies that insiders are buying, might be exactly what you are looking for.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. We aim to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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