Stock Analysis

Here's Why We Think Termoexpert Spólka Akcyjna (WSE:TME) Is Well Worth Watching

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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 as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Termoexpert Spólka Akcyjna (WSE:TME). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Termoexpert Spólka Akcyjna

Termoexpert Spólka Akcyjna's Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Termoexpert Spólka Akcyjna grew its EPS from zł0.014 to zł1.23, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Termoexpert Spólka Akcyjna shareholders can take confidence from the fact that EBIT margins are up from 1.5% to 16%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

WSE:TME Earnings and Revenue History February 27th 2022

Termoexpert Spólka Akcyjna isn't a huge company, given its market capitalization of zł11m. That makes it extra important to check on its balance sheet strength.

Are Termoexpert Spólka Akcyjna 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 Termoexpert Spólka Akcyjna insiders own a meaningful share of the business. Indeed, with a collective holding of 79%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. Valued at only zł11m Termoexpert Spólka Akcyjna is really small for a listed company. That means insiders only have zł8.8m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Termoexpert Spólka Akcyjna To Your Watchlist?

Termoexpert Spólka Akcyjna's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Termoexpert Spólka Akcyjna for a spot on your watchlist. We should say that we've discovered 5 warning signs for Termoexpert Spólka Akcyjna (1 doesn't sit too well with us!) that you should be aware of before investing here.

Although Termoexpert Spólka Akcyjna certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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 Termoexpert Spólka Akcyjna 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.

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