Here's Why I Think S.C. Prebet Aiud (BVB:PREB) Might Deserve Your Attention Today

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like S.C. Prebet Aiud (BVB:PREB). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for S.C. Prebet Aiud

S.C. Prebet Aiud's Improving Profits

Over the last three years, S.C. Prebet Aiud has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, S.C. Prebet Aiud's EPS shot from RON0.076 to RON0.14, over the last year. You don't see 89% year-on-year growth like that, very often.

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. S.C. Prebet Aiud shareholders can take confidence from the fact that EBIT margins are up from 13% to 22%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

Since S.C. Prebet Aiud is no giant, with a market capitalization of RON75m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are S.C. Prebet Aiud 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 S.C. Prebet Aiud insiders own a significant number of shares certainly appeals to me. In fact, they own 35% 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 RON75m S.C. Prebet Aiud is really small for a listed company. That means insiders only have RON26m 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.

Does S.C. Prebet Aiud Deserve A Spot On Your Watchlist?

S.C. Prebet Aiud'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 to my mind S.C. Prebet Aiud is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for S.C. Prebet Aiud that you should be aware of.

Although S.C. Prebet Aiud 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.

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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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