Here's Why I Think ChemoMetec (CPH:CHEMM) Might Deserve Your Attention Today

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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in ChemoMetec (CPH:CHEMM). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for ChemoMetec

How Fast Is ChemoMetec Growing Its Earnings Per Share?

Over the last three years, ChemoMetec 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. Thus, it makes sense to focus on more recent growth rates, instead. Like a falcon taking flight, ChemoMetec's EPS soared from kr.2.99 to kr.4.26, over the last year. That's a impressive gain of 42%.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that ChemoMetec is growing revenues, and EBIT margins improved by 10.4 percentage points to 42%, 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. Click on the chart to see the exact numbers.

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 ChemoMetec's balance sheet strength, before getting too excited.

Are ChemoMetec Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own ChemoMetec shares worth a considerable sum. Given insiders own a small fortune of shares, currently valued at kr.413m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.

Should You Add ChemoMetec To Your Watchlist?

You can't deny that ChemoMetec 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. What about risks? Every company has them, and we've spotted 2 warning signs for ChemoMetec you should know about.

Although ChemoMetec 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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