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Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. And in . found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
So if you’re like me, you might be more interested in profitable, growing companies, like Ur-Energy (TSE:URE). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.
Ur-Energy’s Improving Profits
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Ur-Energy grew its EPS from US$0.00052 to US$0.03, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.
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). While Ur-Energy may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
You don’t drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Ur-Energy’s future profits.
Are Ur-Energy Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.
We haven’t seen any insiders selling Ur-Energy shares, in the last year. With that in mind, it’s heartening that Kathy Walker, the Director of the company, paid US$26k for shares at around US$1.06 each.
Does Ur-Energy Deserve A Spot On Your Watchlist?
Ur-Energy’s earnings per share have taken off like a rocket aimed right at the moon. Growth investors should find it difficult to look past that strong EPS move. And indeed, it could be a sign that the business is at an inflection point. For me, this situation certainly piques my interest. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Ur-Energy is trading on a high P/E or a low P/E, relative to its industry.
The good news is that Ur-Energy is not the only growth stock with insider buying. Here’s a 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
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.