Is Now The Time To Put Skellerup Holdings (NZSE:SKL) On Your Watchlist?

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.

In contrast to all that, many investors prefer to focus on companies like Skellerup Holdings (NZSE:SKL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Skellerup Holdings with the means to add long-term value to shareholders.

See our latest analysis for Skellerup Holdings

How Quickly Is Skellerup Holdings Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. We can see that in the last three years Skellerup Holdings grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained.

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. EBIT margins for Skellerup Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to NZ$293m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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

Are Skellerup Holdings Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Skellerup Holdings followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. As a matter of fact, their holding is valued at NZ$34m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 3.1% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Skellerup Holdings Worth Keeping An Eye On?

As previously touched on, Skellerup Holdings is a growing business, which is encouraging. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. These two factors are a huge highlight for the company which should be a strong contender your watchlists. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Skellerup Holdings is trading on a high P/E or a low P/E, relative to its industry.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with 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.