Do Tasmea's (ASX:TEA) Earnings Warrant Your Attention?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Tasmea (ASX:TEA). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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Tasmea's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that Tasmea has grown EPS by 44% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Tasmea maintained stable EBIT margins over the last year, all while growing revenue 37% to AU$548m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Check out our latest analysis for Tasmea

Fortunately, we've got access to analyst forecasts of Tasmea's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Tasmea Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, MD & Executive Director Stephen Young spent AU$291k acquiring shares, doing so at an average price of AU$2.83. Purchases like this clue us in to the to the faith management has in the business' future.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Tasmea will reveal that insiders own a significant piece of the pie. Owning 45% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. At the current share price, that insider holding is worth a staggering AU$570m. That level of investment from insiders is nothing to sneeze at.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Tasmea's CEO, Stephen Young, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Tasmea with market caps between AU$610m and AU$2.4b is about AU$1.6m.

The Tasmea CEO received AU$850k in compensation for the year ending June 2025. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Tasmea Deserve A Spot On Your Watchlist?

Tasmea's earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Tasmea belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Tasmea you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Tasmea, you'll probably love this curated collection of companies in AU that have an attractive valuation alongside 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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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.