Do 5N Plus' (TSE:VNP) Earnings Warrant Your Attention?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

In contrast to all that, many investors prefer to focus on companies like 5N Plus (TSE:VNP), which has not only revenues, but also profits. 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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5N Plus' Improving Profits

5N Plus has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, 5N Plus' EPS soared from US$0.19 to US$0.24, over the last year. That's a commendable gain of 31%.

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. The music to the ears of 5N Plus shareholders is that EBIT margins have grown from 9.3% to 14% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Check out our latest analysis for 5N Plus

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 5N Plus' future profits.

Are 5N Plus Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own 5N Plus shares worth a considerable sum. As a matter of fact, their holding is valued at US$38m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 4.5%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

It means a lot to see insiders invested in the business, but shareholders may be wondering if remuneration policies are in their best interest. Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to 5N Plus, with market caps between US$400m and US$1.6b, is around US$1.9m.

The 5N Plus CEO received US$1.3m in compensation for the year ending December 2024. That comes in below the average for similar sized companies and seems pretty reasonable. 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. It can also be a sign of a culture of integrity, in a broader sense.

Is 5N Plus Worth Keeping An Eye On?

You can't deny that 5N Plus has grown its earnings per share at a very impressive rate. That's attractive. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes 5N Plus look rather interesting indeed. However, before you get too excited we've discovered 1 warning sign for 5N Plus that you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Canadian companies which have demonstrated growth backed by significant insider holdings.

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.