Stock Analysis

Here's Why We Think Endymed (TLV:ENDY) Is Well Worth Watching

TASE:ENDY
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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 completely 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.'

So if you're like me, you might be more interested in profitable, growing companies, like Endymed (TLV:ENDY). 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 Endymed

How Quickly Is Endymed Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Over the last three years, Endymed has grown EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

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. While we note Endymed's EBIT margins were flat over the last year, revenue grew by a solid 40% to US$19m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
TASE:ENDY Earnings and Revenue History November 29th 2021

Endymed isn't a huge company, given its market capitalization of ₪78m. That makes it extra important to check on its balance sheet strength.

Are Endymed Insiders Aligned With All Shareholders?

As a general rule, I think it worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. I discovered that the median total compensation for the CEOs of companies like Endymed with market caps under US$200m is about US$417k.

The Endymed CEO received US$268k in compensation for the year ending . That seems pretty reasonable, especially given its 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 good governance, more generally.

Should You Add Endymed To Your Watchlist?

As I already mentioned, Endymed is a growing business, which is what I like to see. On top of that, my faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So I do think the stock deserves further research, if not instant addition to your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Endymed , and understanding them should be part of your investment process.

Although Endymed certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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

Valuation is complex, but we're helping make it simple.

Find out whether Endymed is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.

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