For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Dundee Precious Metals (TSE:DPM). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Dundee Precious Metals Growing Its Earnings Per Share?
Over the last three years, Dundee Precious Metals has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Dundee Precious Metals's EPS shot from US$0.35 to US$0.99, over the last year. Year on year growth of 185% is certainly a sight to behold.
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. Dundee Precious Metals shareholders can take confidence from the fact that EBIT margins are up from 34% to 37%, and revenue is growing. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Dundee Precious Metals?
Are Dundee Precious Metals Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Insiders both bought and sold Dundee Precious Metals shares in the last year, but the good news is they spent US$24k more buying than they netted selling. So, on balance, the insider transactions are mildly encouraging. We also note that it was the President, David Rae, who made the biggest single acquisition, paying CA$197k for shares at about CA$7.89 each.
Does Dundee Precious Metals Deserve A Spot On Your Watchlist?
Dundee Precious Metals's earnings have taken off like any random crypto-currency did, back in 2017. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put Dundee Precious Metals on your watchlist. We should say that we've discovered 3 warning signs for Dundee Precious Metals that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Dundee Precious Metals, you'll probably love this free list of growing companies that insiders are buying.
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.