For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in AS Harju Elekter (TAL:HAE1T). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.
How Fast Is AS Harju Elekter Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. AS Harju Elekter managed to grow EPS by 9.8% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.
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. AS Harju Elekter's EBIT margins are flat but, of some concern, its revenue is actually down. Suffice it to say that is not a great sign of growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
AS Harju Elekter isn't a huge company, given its market capitalization of €143m. That makes it extra important to check on its balance sheet strength.
Are AS Harju Elekter Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own AS Harju Elekter shares worth a considerable sum. To be specific, they have €12m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 8.6% of the company, demonstrating a degree of high-level alignment with shareholders.
Does AS Harju Elekter Deserve A Spot On Your Watchlist?
One important encouraging feature of AS Harju Elekter is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for AS Harju Elekter that you need to be mindful of.
Although AS Harju Elekter 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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