Stock Analysis

Here's Why I Think Elton International Trading (ATH:ELTON) Is An Interesting Stock

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ATSE:ELTON
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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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like Elton International Trading (ATH:ELTON), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Elton International Trading

Elton International Trading's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. It's good to see that Elton International Trading's EPS have grown from €0.12 to €0.13 over twelve months. That's a 11% gain; respectable growth in the broader scheme of things.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It seems Elton International Trading is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not a major concern but nor does it point to the long term growth we like to see.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
ATSE:ELTON Earnings and Revenue History March 9th 2021

Since Elton International Trading is no giant, with a market capitalization of €38m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Elton International Trading Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling Elton International Trading shares, in the last year. With that in mind, it's heartening that Nestor Papathanasiou Dimitriou, the Founder of the company, paid €11k for shares at around €1.28 each.

On top of the insider buying, we can also see that Elton International Trading insiders own a large chunk of the company. In fact, they own 75% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have €28m invested in the business, using the current share price. That's nothing to sneeze at!

Is Elton International Trading Worth Keeping An Eye On?

As I already mentioned, Elton International Trading is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. It is worth noting though that we have found 3 warning signs for Elton International Trading (1 shouldn't be ignored!) that you need to take into consideration.

As a growth investor I do like to see insider buying. But Elton International Trading 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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