Stock Analysis

Do SSE's (LON:SSE) Earnings Warrant Your Attention?

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LSE:SSE
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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. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in SSE (LON:SSE). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for SSE

How Fast Is SSE Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that SSE has grown EPS by 50% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

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. While revenue is looking a bit flat, the good news is EBIT margins improved by 10.8 percentage points to 26%, in the last twelve months. That's a real positive.

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.

earnings-and-revenue-history
LSE:SSE Earnings and Revenue History August 8th 2021

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for SSE's future profits.

Are SSE Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

The good news for SSE shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Independent Non-Executive Director Helen Mahy bought UK£20k worth of shares at an average price of around UK£15.44.

The good news, alongside the insider buying, for SSE bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold UK£10m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.06% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add SSE To Your Watchlist?

SSE's earnings have taken off like any random crypto-currency did, back in 2017. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe SSE deserves timely attention. Before you take the next step you should know about the 4 warning signs for SSE (2 are a bit concerning!) that we have uncovered.

The good news is that SSE is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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