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

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

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). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Stolt-Nielsen with the means to add long-term value to shareholders.

See our latest analysis for Stolt-Nielsen

How Fast Is Stolt-Nielsen Growing Its Earnings Per Share?

In the last three years Stolt-Nielsen's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Stolt-Nielsen's EPS soared from US$5.48 to US$7.51, over the last year. That's a fantastic gain of 37%.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Stolt-Nielsen reported flat revenue and EBIT margins over the last year. That's not bad, but it doesn't point to ongoing future growth, either.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Stolt-Nielsen's future EPS 100% free.

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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

First and foremost; there we saw no insiders sell Stolt-Nielsen shares in the last year. But the important part is that Chief Executive Officer Udo Lange spent US$2.7m buying stock, at an average price of US$341. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

Is Stolt-Nielsen Worth Keeping An Eye On?

You can't deny that Stolt-Nielsen has grown its earnings per share at a very impressive rate. That's attractive. 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. However, before you get too excited we've discovered 3 warning signs for Stolt-Nielsen (1 can't be ignored!) 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 curated collection of companies in NO that have an attractive valuation alongside 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.