Stock Analysis

Does Stingray Group (TSE:RAY.A) Deserve A Spot On Your Watchlist?

Published
TSX:RAY.A
Source: Shutterstock

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Stingray Group (TSE:RAY.A). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Stingray Group with the means to add long-term value to shareholders.

See our latest analysis for Stingray Group

How Fast Is Stingray Group Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Impressively, Stingray Group has grown EPS by 34% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Stingray Group is growing revenues, and EBIT margins improved by 7.7 percentage points to 26%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

earnings-and-revenue-history
TSX:RAY.A Earnings and Revenue History January 24th 2024

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Stingray Group.

Are Stingray Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's pleasing to note that insiders spent CA$2.2m buying Stingray Group shares, over the last year, without reporting any share sales whatsoever. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. We also note that it was the Independent Chairman, Mark Pathy, who made the biggest single acquisition, paying CA$584k for shares at about CA$5.08 each.

Along with the insider buying, another encouraging sign for Stingray Group is that insiders, as a group, have a considerable shareholding. Holding CA$119m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. At 27% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because on our analysis the CEO, Eric Boyko, is paid less than the median for similar sized companies. The median total compensation for CEOs of companies similar in size to Stingray Group, with market caps between CA$269m and CA$1.1b, is around CA$1.8m.

Stingray Group's CEO took home a total compensation package worth CA$1.2m in the year leading up to March 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Does Stingray Group Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Stingray Group's strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. We should say that we've discovered 2 warning signs for Stingray Group that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Stingray Group, you'll probably love this curated collection of companies in CA that have witnessed growth alongside insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Stingray Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.