We Ran A Stock Scan For Earnings Growth And Thor Explorations (CVE:THX) Passed With Ease

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Thor Explorations (CVE:THX). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Thor Explorations with the means to add long-term value to shareholders.

See our latest analysis for Thor Explorations

Thor Explorations' 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. It's an outstanding feat for Thor Explorations to have grown EPS from US$0.0018 to US$0.04 in just one 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. EBIT margins for Thor Explorations remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 484% to US$181m. That's a real positive.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Thor Explorations' future EPS 100% free.

Are Thor Explorations 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

One shining light for Thor Explorations is the serious outlay one insider has made to buy shares, in the last year. In other words, the President, Olusegun Lawson, acquired US$1.9m worth of shares over the previous 12 months at an average price of around US$0.29. Big insider buys like that are a rarity and should prompt discussion on the merits of the business.

Along with the insider buying, another encouraging sign for Thor Explorations is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$21m. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 9.3% of the shares on issue for the business, an appreciable amount considering the market cap.

Should You Add Thor Explorations To Your Watchlist?

Thor Explorations' earnings have taken off in quite an impressive fashion. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Thor Explorations belongs near the top of your watchlist. Of course, just because Thor Explorations is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Thor Explorations, 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.