Here's Why We Think PetroTal (CVE:TAL) Might Deserve Your Attention Today

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 PetroTal (CVE:TAL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide PetroTal with the means to add long-term value to shareholders.

View our latest analysis for PetroTal

PetroTal's Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that PetroTal grew its EPS from US$0.066 to US$0.20, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. While we note PetroTal achieved similar EBIT margins to last year, revenue grew by a solid 199% to US$276m. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of PetroTal's forecast profits?

Are PetroTal Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. PetroTal followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have US$45m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 7.3% of the shares on issue for the business, an appreciable amount considering the market cap.

Is PetroTal Worth Keeping An Eye On?

PetroTal's earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering PetroTal for a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with PetroTal (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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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.