With EPS Growth And More, Siem Offshore (OB:SIOFF) Makes An Interesting Case

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Siem Offshore (OB:SIOFF). 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 Siem Offshore

Siem Offshore's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Siem Offshore's EPS went from US$0.13 to US$0.73 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

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. Siem Offshore shareholders can take confidence from the fact that EBIT margins are up from 14% to 29%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Siem Offshore?

Are Siem Offshore Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Siem Offshore insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at US$390m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 4.7%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. A brief analysis of the CEO compensation suggests they are. For companies with market capitalisations between US$400m and US$1.6b, like Siem Offshore, the median CEO pay is around US$757k.

The Siem Offshore CEO received total compensation of only US$506k in the year to December 2022. This total may indicate that the CEO is sacrificing take home pay for performance-based benefits, ensuring that their motivations are synonymous with strong company results. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Siem Offshore Worth Keeping An Eye On?

Siem Offshore's earnings have taken off in quite an impressive fashion. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Siem Offshore certainly ticks a few boxes, so we think it's probably well worth further consideration. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Siem Offshore (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in NO with promising growth potential and insider confidence.

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.