Here's Why Stolt-Nielsen (OB:SNI) Has Caught The Eye Of Investors

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Stolt-Nielsen (OB:SNI). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Stolt-Nielsen

Stolt-Nielsen's Improving Profits

Stolt-Nielsen has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Stolt-Nielsen's EPS skyrocketed from US$4.12 to US$5.48, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 33%.

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. The good news is that Stolt-Nielsen is growing revenues, and EBIT margins improved by 3.8 percentage points to 17%, over the last year. 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. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Stolt-Nielsen's future profits.

Are Stolt-Nielsen Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First things first, there weren't any reports of insiders selling shares in Stolt-Nielsen in the last 12 months. But the important part is that Chief Executive Officer Udo Lange spent US$2.7m buying stock, at an average price of US$341. Big buys like that may signal an opportunity; actions speak louder than words.

Is Stolt-Nielsen Worth Keeping An Eye On?

For growth investors, Stolt-Nielsen's raw rate of earnings growth is a beacon in the night. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. To put it succinctly; Stolt-Nielsen is a strong candidate for your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Stolt-Nielsen that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Stolt-Nielsen, you'll probably love this free list of growing companies that insiders are buying.

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.