With EPS Growth And More, JEMTEC (CVE:JTC) Is Interesting

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

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 that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for JEMTEC

JEMTEC's Improving Profits

In the last three years JEMTEC's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Over twelve months, JEMTEC increased its EPS from CA$0.16 to CA$0.16. That amounts to a small improvement of 4.0%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). This approach makes JEMTEC look pretty good, on balance; although revenue is flattish, EBIT margins improved from 23% to 27% in the last year. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since JEMTEC is no giant, with a market capitalization of CA$5.2m, so you should definitely check its cash and debt before getting too excited about its prospects.

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 48% 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. Valued at only CA$5.2m JEMTEC is really small for a listed company. That means insiders only have CA$2.5m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Is JEMTEC Worth Keeping An Eye On?

As I already mentioned, JEMTEC is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. However, before you get too excited we've discovered 4 warning signs for JEMTEC (1 is concerning!) that you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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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