Here's Why Tempus Capital (CSE:TEMP) Has Caught The Eye Of Investors

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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Tempus Capital (CSE:TEMP). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Tempus Capital with the means to add long-term value to shareholders.

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Tempus Capital's Improving Profits

Over the last three years, Tempus Capital has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Tempus Capital's EPS skyrocketed from CA$0.018 to CA$0.024, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 32%.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. On the one hand, Tempus Capital's EBIT margins fell over the last year, but on the other hand, revenue grew. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

Since Tempus Capital is no giant, with a market capitalisation of CA$6.1m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Tempus Capital 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. 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.

We note that Tempus Capital insiders spent CA$73k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Independent Director, Bernard Tanz, who made the biggest single acquisition, paying CA$64k for shares at about CA$27.50 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Tempus Capital insiders own more than a third of the company. In fact, they own 39% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only CA$6.1m Tempus Capital is really small for a listed company. That means insiders only have CA$2.4m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Tempus Capital Deserve A Spot On Your Watchlist?

You can't deny that Tempus Capital has grown its earnings per share at a very impressive rate. That's attractive. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. What about risks? Every company has them, and we've spotted 5 warning signs for Tempus Capital (of which 4 are a bit unpleasant!) you should know about.

Keen growth investors love to see insider buying. Thankfully, Tempus Capital 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. 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.