Is Now The Time To Put Total Gabon (EPA:EC) On Your Watchlist?

Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Total Gabon (EPA:EC). 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.

Check out our latest analysis for Total Gabon

Total Gabon’s Improving Profits

Over the last three years, Total Gabon has grown earnings per share (EPS) like 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 the last firework on New Year’s Eve accelerating into the sky, Total Gabon’s EPS shot from US$24.01 to US$57.38, over the last year. Year on year growth of 139% is certainly a sight to behold.

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. This approach makes Total Gabon look pretty good, on balance; although revenue is flattish, EBIT margins improved from 9.0% to 24% 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. For finer detail, click on the image.

ENXTPA:EC Income Statement, April 23rd 2019
ENXTPA:EC Income Statement, April 23rd 2019

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 Total Gabon’s balance sheet strength, before getting too excited.

Are Total Gabon Insiders Aligned With All Shareholders?

Should You Add Total Gabon To Your Watchlist?

Total Gabon’s earnings per share have taken off like a rocket aimed right at the moon. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Total Gabon shapes up to industry peers, when it comes to ROE.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.