Is Now The Time To Put Unitronics (1989) (RG) (TLV:UNIT) On Your Watchlist?

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

In contrast to all that, I prefer to spend time on companies like Unitronics (1989) (RG) (TLV:UNIT), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Unitronics (1989) (RG)

How Fast Is Unitronics (1989) (RG) Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Unitronics (1989) (RG) managed to grow EPS by 14% per year, over three years. That's a pretty good rate, if the company can sustain it.

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. Unitronics (1989) (RG)'s EBIT margins have actually improved by 6.7 percentage points in the last year, to reach 15%, but, on the flip side, revenue was down 8.3%. That's not ideal.

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.

Unitronics (1989) (RG) isn't a huge company, given its market capitalization of ₪297m. That makes it extra important to check on its balance sheet strength.

Are Unitronics (1989) (RG) Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Unitronics (1989) (RG) shares worth a considerable sum. Indeed, they hold ₪65m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 22% 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? 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 Unitronics (1989) (RG) with market caps under ₪657m is about ₪1.4m.

The Unitronics (1989) (RG) CEO received ₪989k in compensation for the year ending . That seems pretty reasonable, especially given its below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.

Should You Add Unitronics (1989) (RG) To Your Watchlist?

As I already mentioned, Unitronics (1989) (RG) is a growing business, which is what I like to see. The fact that EPS is growing is a genuine positive for Unitronics (1989) (RG), but the pretty picture gets better than that. Boasting both modest CEO pay and considerable insider ownership, I'd argue this one is worthy of the watchlist, at least. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Unitronics (1989) (RG) , and understanding them should be part of your investment process.

Although Unitronics (1989) (RG) 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.

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