Stock Analysis

If EPS Growth Is Important To You, Port of Tauranga (NZSE:POT) Presents An Opportunity

Published
NZSE:POT
Source: Shutterstock

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 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 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.

See our latest analysis for Port of Tauranga

Port of Tauranga's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Port of Tauranga managed to grow EPS by 5.2% per year, over three years. This may not be setting the world alight, but it does show that EPS is on the upwards trend.

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 10.0% to NZ$401m. That's progress.

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

earnings-and-revenue-history
NZSE:POT Earnings and Revenue History April 26th 2023

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.

The good news for Port of Tauranga shareholders is that no insiders reported selling shares in the last year. Add in the fact that Julia Hoare, the Independent Chairman of the company, paid NZ$25k for shares at around NZ$6.16 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

The good news, alongside the insider buying, for Port of Tauranga bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at NZ$23m. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.5% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Port of Tauranga Worth Keeping An Eye On?

One important encouraging feature of Port of Tauranga is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. Now, you could try to make up your mind on Port of Tauranga by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

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.

Valuation is complex, but we're helping make it simple.

Find out whether Port of Tauranga is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.