Here's Why We Think Standard Chartered (LON:STAN) Is Well Worth Watching

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Standard Chartered (LON:STAN). 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.

See our latest analysis for Standard Chartered

Standard Chartered's Improving Profits

In the last three years Standard Chartered's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Standard Chartered's EPS shot from US$0.39 to US$0.70, over the last year. It's a rarity to see 78% year-on-year growth like that.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Standard Chartered's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Standard Chartered achieved similar EBIT margins to last year, revenue grew by a solid 6.0% to US$14b. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Standard Chartered's forecast profits?

Are Standard Chartered Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

While Standard Chartered insiders did net US$955k selling stock over the last year, they invested US$1.6m, a much higher figure. An optimistic sign for those with Standard Chartered in their watchlist. We also note that it was the company insider, Pi-Cheng Hung, who made the biggest single acquisition, paying UK£376k for shares at about UK£4.88 each.

On top of the insider buying, it's good to see that Standard Chartered insiders have a valuable investment in the business. To be specific, they have US$36m worth of shares. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does Standard Chartered Deserve A Spot On Your Watchlist?

Standard Chartered's earnings have taken off in quite an impressive fashion. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Standard Chartered deserves timely attention. You should always think about risks though. Case in point, we've spotted 1 warning sign for Standard Chartered you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Standard Chartered isn't the only one. You can see a 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. 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.