Here's Why We Think El-Mor Electric Installation & Services (1986) (TLV:ELMR) Is Well Worth Watching

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 currently 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.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 El-Mor Electric Installation & Services (1986) (TLV:ELMR). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for El-Mor Electric Installation & Services (1986)

El-Mor Electric Installation & Services (1986)'s Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, El-Mor Electric Installation & Services (1986) has grown EPS by 34% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. El-Mor Electric Installation & Services (1986) shareholders can take confidence from the fact that EBIT margins are up from 5.3% to 8.0%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

El-Mor Electric Installation & Services (1986) isn't a huge company, given its market capitalisation of ₪410m. That makes it extra important to check on its balance sheet strength.

Are El-Mor Electric Installation & Services (1986) Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Shareholders will be pleased by the fact that insiders own El-Mor Electric Installation & Services (1986) shares worth a considerable sum. Indeed, they hold ₪132m worth of its stock. This considerable investment should help drive long-term value in the business. Those holdings account for over 32% of the company; visible skin in the game.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. Our analysis has discovered that the median total compensation for the CEOs of companies like El-Mor Electric Installation & Services (1986) with market caps under ₪712m is about ₪1.5m.

El-Mor Electric Installation & Services (1986)'s CEO took home a total compensation package worth ₪1.3m in the year leading up to December 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does El-Mor Electric Installation & Services (1986) Deserve A Spot On Your Watchlist?

You can't deny that El-Mor Electric Installation & Services (1986) has grown its earnings per share at a very impressive rate. That's attractive. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. The overarching message here is that El-Mor Electric Installation & Services (1986) has underlying strengths that make it worth a look at. We should say that we've discovered 3 warning signs for El-Mor Electric Installation & Services (1986) that you should be aware of before investing here.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you 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.

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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.