Here's Why I Think Werth-Holz (WSE:WHH) Might Deserve Your Attention Today

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Werth-Holz (WSE:WHH). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Werth-Holz

How Quickly Is Werth-Holz Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud Werth-Holz's stratospheric annual EPS growth of 54%, compound, 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. While we note Werth-Holz's EBIT margins were flat over the last year, revenue grew by a solid 51% to zł54m. That's a real positive.

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.

Since Werth-Holz is no giant, with a market capitalization of zł42m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Werth-Holz Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Werth-Holz insiders own a meaningful share of the business. In fact, they own 37% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only zł42m Werth-Holz is really small for a listed company. That means insiders only have zł16m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is Werth-Holz Worth Keeping An Eye On?

Werth-Holz's earnings have taken off like any random crypto-currency did, back in 2017. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. 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 Werth-Holz for a spot on your watchlist. You still need to take note of risks, for example - Werth-Holz has 4 warning signs (and 3 which are a bit unpleasant) we think you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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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