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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Troax Group (STO:TROAX). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
Troax Group’s Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Troax Group has managed to grow EPS by 29% per year over three years. If the company can sustain that sort of growth, we’d expect shareholders to come away winners.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Troax Group maintained stable EBIT margins over the last year, all while growing revenue 6.9% to €165m. That’s a real positive.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are Troax Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that Troax Group insiders spent €745k on stock, over the last year; in contrast, we didn’t see any selling. That’s nice to see, because it suggests insiders are optimistic.
The good news, alongside the insider buying, for Troax Group bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping €511m worth of shares as a group, insiders have plenty riding on the company’s success. At 8.6% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.
While insiders are apparently happy to hold and accumulate shares, that is just part of the pretty picture. The cherry on top is that the CEO, Thomas Widstrand is paid comparatively modestly to CEOs at similar sized companies. I discovered that the median total compensation for the CEOs of companies like Troax Group with market caps between €362m and €1.4b is about €540k.
The CEO of Troax Group was paid just €479k in total compensation for the year ending December 2018. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO – that is often a good sign. 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 a culture of integrity, in a broader sense.
Should You Add Troax Group To Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Troax Group’s strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. Once you’ve identified a business you like, the next step is to consider what you think it’s worth. And right now is your chance to view our exclusive discounted cashflow valuation of Troax Group. You might benefit from giving it a glance today.
The good news is that Troax Group 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
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