Here's Why We Think WestBond Enterprises (CVE:WBE) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like WestBond Enterprises (CVE:WBE). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for WestBond Enterprises

How Fast Is WestBond Enterprises Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that WestBond Enterprises grew its EPS from CA$0.015 to CA$0.072, in one short year. Even though that growth rate is unlikely to 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.

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 WestBond Enterprises is growing revenues, and EBIT margins improved by 17.3 percentage points to 25%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Since WestBond Enterprises is no giant, with a market capitalization of CA$26m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are WestBond Enterprises Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for WestBond Enterprises shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Peter Toigo, the Independent Director of the company, paid CA$32k for shares at around CA$0.32 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since WestBond Enterprises insiders own more than a third of the company. Indeed, with a collective holding of 52%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. Valued at only CA$26m WestBond Enterprises is really small for a listed company. So despite a large proportional holding, insiders only have CA$14m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does WestBond Enterprises Deserve A Spot On Your Watchlist?

WestBond Enterprises's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The cherry on top is that insiders own a bunch of shares, and one has been buying more. Because of the potential that it has reached an inflection point, I'd suggest WestBond Enterprises belongs on the top of your watchlist. It is worth noting though that we have found 3 warning signs for WestBond Enterprises that you need to take into consideration.

As a growth investor I do like to see insider buying. But WestBond Enterprises 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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