Here's Why We Think Wesdome Gold Mines (TSE:WDO) Is Well Worth Watching

By
Simply Wall St
Published
February 03, 2021
TSX:WDO
Source: Shutterstock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Wesdome Gold Mines (TSE:WDO). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Wesdome Gold Mines

Wesdome Gold Mines's Improving Profits

Over the last three years, Wesdome Gold Mines 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 a firecracker arcing through the night sky, Wesdome Gold Mines's EPS shot from CA$0.23 to CA$0.39, over the last year. You don't see 69% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Wesdome Gold Mines is growing revenues, and EBIT margins improved by 9.7 percentage points to 40%, over the last year. 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. For finer detail, click on the image.

earnings-and-revenue-history
TSX:WDO Earnings and Revenue History February 3rd 2021

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Wesdome Gold Mines EPS 100% free.

Are Wesdome Gold Mines 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Wesdome Gold Mines top brass are certainly in sync, not having sold any shares, over the last year. But my excitement comes from the CA$149k that Independent Chairman of the Board Warwick Morley-Jepson spent buying shares (at an average price of about CA$6.93).

Should You Add Wesdome Gold Mines To Your Watchlist?

Wesdome Gold Mines'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. You still need to take note of risks, for example - Wesdome Gold Mines has 1 warning sign we think you should be aware of.

As a growth investor I do like to see insider buying. But Wesdome Gold Mines isn't the only one. You can see a a free list of them here.

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. 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.
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