Stock Analysis

Should You Be Adding Poltronic (WSE:PTN) To Your Watchlist Today?

WSE:PTN
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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

In contrast to all that, I prefer to spend time on companies like Poltronic (WSE:PTN), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Poltronic

Poltronic's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. I, for one, am blown away by the fact that Poltronic has grown EPS by 55% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Poltronic's EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.

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
WSE:PTN Earnings and Revenue History December 30th 2020

Poltronic isn't a huge company, given its market capitalization of zł6.8m. That makes it extra important to check on its balance sheet strength.

Are Poltronic Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that Poltronic insiders own a meaningful share of the business. Indeed, with a collective holding of 81%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, Poltronic is a very small company, with a market cap of only zł6.8m. So despite a large proportional holding, insiders only have zł5.5m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Poltronic To Your Watchlist?

Poltronic's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Poltronic is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Poltronic is showing 3 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

You can invest in 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. 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.
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