Do Tesgas's (WSE:TSG) Earnings Warrant Your Attention?

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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Tesgas (WSE:TSG). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Tesgas

How Fast Is Tesgas Growing Its Earnings Per Share?

In the last three years Tesgas's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, Tesgas's EPS soared from zł0.32 to zł0.51, in just one year. That's a commendable gain of 58%.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Tesgas's EBIT margins have actually improved by 2.6 percentage points in the last year, to reach 6.6%, but, on the flip side, revenue was down 3.7%. That's not ideal.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Tesgas isn't a huge company, given its market capitalization of zł47m. That makes it extra important to check on its balance sheet strength.

Are Tesgas 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 as you can imagine, the fact that Tesgas insiders own a significant number of shares certainly appeals to me. In fact, they own 45% of the shares, making insiders a very influential shareholder group. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Valued at only zł47m Tesgas is really small for a listed company. So despite a large proportional holding, insiders only have zł21m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Should You Add Tesgas To Your Watchlist?

For growth investors like me, Tesgas's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. However, before you get too excited we've discovered 1 warning sign for Tesgas that you should be aware of.

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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