Here's Why We Think Tenaris (BIT:TEN) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Tenaris (BIT:TEN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Tenaris

How Fast Is Tenaris Growing Its Earnings Per Share?

Over the last three years, Tenaris has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that Tenaris' EPS has grown from US$2.69 to US$3.17 over twelve months. There's little doubt shareholders would be happy with that 18% gain.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for Tenaris remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.7% to US$14b. That's encouraging news for the company!

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.

Fortunately, we've got access to analyst forecasts of Tenaris' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Tenaris Insiders Aligned With All Shareholders?

Owing to the size of Tenaris, we wouldn't expect insiders to hold a significant proportion of the company. But we do take comfort from the fact that they are investors in the company. Indeed, they hold US$12m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.08% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Tenaris To Your Watchlist?

One important encouraging feature of Tenaris is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Before you take the next step you should know about the 2 warning signs for Tenaris (1 is potentially serious!) that we have uncovered.

Although Tenaris certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Italian companies that not only boast of strong growth but have strong insider backing.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com