Here's Why I Think Sano Bruno's Enterprises (TLV:SANO1) Is An Interesting Stock

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

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Sano Bruno's Enterprises (TLV:SANO1). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

See our latest analysis for Sano Bruno's Enterprises

How Quickly Is Sano Bruno's Enterprises Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Over the last three years, Sano Bruno's Enterprises has grown EPS by 17% per year. That growth rate is fairly good, assuming the company can keep it up.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Sano Bruno's Enterprises's EBIT margins were flat over the last year, revenue grew by a solid 4.5% to ₪1.8b. That's progress.

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Sano Bruno's Enterprises's balance sheet strength, before getting too excited.

Are Sano Bruno's Enterprises Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Sano Bruno's Enterprises insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 85%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. And their holding is extremely valuable at the current share price, totalling ₪3.3b. Now that's what I call some serious skin in the game!

It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I'd say they are indeed. I discovered that the median total compensation for the CEOs of companies like Sano Bruno's Enterprises with market caps between ₪3.1b and ₪10b is about ₪3.5m.

Sano Bruno's Enterprises offered total compensation worth ₪2.3m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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.

Is Sano Bruno's Enterprises Worth Keeping An Eye On?

As I already mentioned, Sano Bruno's Enterprises is a growing business, which is what I like to see. Earnings growth might be the main game for Sano Bruno's Enterprises, but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. You should always think about risks though. Case in point, we've spotted 1 warning sign for Sano Bruno's Enterprises you should be aware of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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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.