Should You Be Adding Sandstorm Gold (TSE:SSL) To Your Watchlist 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 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Sandstorm Gold (TSE:SSL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sandstorm Gold with the means to add long-term value to shareholders.

View our latest analysis for Sandstorm Gold

Sandstorm Gold's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. To the delight of shareholders, Sandstorm Gold has achieved impressive annual EPS growth of 42%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. On the revenue front, Sandstorm Gold has done well over the past year, growing revenue by 29% to US$149m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

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.

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

Are Sandstorm Gold 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.

Even though there was some insider selling over the last year, that was outweighed by Co-Founder Nolan Watson's huge outlay of US$1.3m, spent buying shares. We should note the average purchase price was around US$6.98. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

Along with the insider buying, another encouraging sign for Sandstorm Gold is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$23m. That's a lot of money, and no small incentive to work hard. Despite being just 1.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because Sandstorm Gold's CEO, Nolan Watson, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between US$1.0b and US$3.2b, like Sandstorm Gold, the median CEO pay is around US$2.3m.

The Sandstorm Gold CEO received US$1.9m in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Sandstorm Gold To Your Watchlist?

Sandstorm Gold's earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Sandstorm Gold belongs near the top of your watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for Sandstorm Gold that you need to be mindful of.

The good news is that Sandstorm Gold 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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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.