Here's Why We Think Port of Tauranga (NZSE:POT) 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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Port of Tauranga (NZSE:POT). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Port of Tauranga with the means to add long-term value to shareholders.

View our latest analysis for Port of Tauranga

How Quickly Is Port of Tauranga 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 means EPS growth is considered a real positive by most successful long-term investors. Port of Tauranga managed to grow EPS by 4.8% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. While we note Port of Tauranga achieved similar EBIT margins to last year, revenue grew by a solid 19% to NZ$365m. That's encouraging news for the company!

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

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Port of Tauranga's forecast profits?

Are Port of Tauranga Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Shareholders in Port of Tauranga will be more than happy to see insiders committing themselves to the company, spending NZ$352k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. It is also worth noting that it was company insider Mark Cairns who made the biggest single purchase, worth NZ$167k, paying NZ$7.39 per share.

The good news, alongside the insider buying, for Port of Tauranga bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold NZ$37m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Port of Tauranga Worth Keeping An Eye On?

One positive for Port of Tauranga is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Port of Tauranga.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Port of Tauranga, 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.