Here's Why We Think Port of Tauranga (NZSE:POT) Is Well Worth Watching

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. 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.

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). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Port of Tauranga has grown EPS by 16% 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. The good news is that Port of Tauranga is growing revenues, and EBIT margins improved by 2.8 percentage points to 40%, 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. To see the actual numbers, click on the chart.

See our latest analysis for Port of Tauranga

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

Are Port of Tauranga 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Port of Tauranga top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the Director, Fraser Whineray, paid NZ$267k to buy shares at an average price of NZ$7.64. Strong buying like that could be a sign of opportunity.

On top of the insider buying, it's good to see that Port of Tauranga insiders have a valuable investment in the business. As a matter of fact, their holding is valued at NZ$24m. That's a lot of money, and no small incentive to work hard. Despite being just 0.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Port of Tauranga Deserve A Spot On Your Watchlist?

One important encouraging feature of Port of Tauranga is that it is growing profits. 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. Before you take the next step you should know about the 1 warning sign for Port of Tauranga that we have uncovered.

Keen growth investors love to see insider activity. Thankfully, Port of Tauranga isn't the only one. You can see a a curated list of New Zealander companies which have exhibited consistent growth accompanied by high insider ownership.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.