Does JEMTEC (CVE:JTC) Deserve A Spot On Your Watchlist?

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. 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 JEMTEC (CVE:JTC). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for JEMTEC

How Fast Is JEMTEC Growing Its Earnings Per Share?

Over the last three years, JEMTEC 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. As a result, I'll zoom in on growth over the last year, instead. Like a falcon taking flight, JEMTEC's EPS soared from CA$0.14 to CA$0.18, over the last year. That's a impressive gain of 35%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. JEMTEC shareholders can take confidence from the fact that EBIT margins are up from 23% to 29%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

JEMTEC isn't a huge company, given its market capitalization of CA$5.3m. That makes it extra important to check on its balance sheet strength.

Are JEMTEC Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that JEMTEC insiders own a meaningful share of the business. In fact, they own 47% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, JEMTEC is a very small company, with a market cap of only CA$5.3m. So despite a large proportional holding, insiders only have CA$2.5m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Should You Add JEMTEC To Your Watchlist?

You can't deny that JEMTEC has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. We should say that we've discovered 4 warning signs for JEMTEC (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Although JEMTEC certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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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