Is Now The Time To Put Südwestdeutsche Salzwerke (FRA:SSH) On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Südwestdeutsche Salzwerke (FRA:SSH). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Südwestdeutsche Salzwerke

How Fast Is Südwestdeutsche Salzwerke Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Südwestdeutsche Salzwerke's EPS has grown 21% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. The good news is that Südwestdeutsche Salzwerke is growing revenues, and EBIT margins improved by 11.6 percentage points to 17%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Südwestdeutsche Salzwerke's balance sheet strength, before getting too excited.

Are Südwestdeutsche Salzwerke Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. For companies with market capitalisations between €392m and €1.6b, like Südwestdeutsche Salzwerke, the median CEO pay is around €1.3m.

The CEO of Südwestdeutsche Salzwerke only received €381k in total compensation for the year ending December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. 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. It can also be a sign of good governance, more generally.

Does Südwestdeutsche Salzwerke Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Südwestdeutsche Salzwerke's strong EPS growth. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. We think that based on its merits alone, this stock is worth watching into the future. Still, you should learn about the 2 warning signs we've spotted with Südwestdeutsche Salzwerke (including 1 which is a bit concerning).

Although Südwestdeutsche Salzwerke certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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. 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.