Is Now The Time To Put Tethys Oil (STO:TETY) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Tethys Oil (STO:TETY). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Tethys Oil with the means to add long-term value to shareholders.

View our latest analysis for Tethys Oil

Tethys Oil's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Impressively, Tethys Oil has grown EPS by 30% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Not all of Tethys Oil's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The good news is that Tethys Oil is growing revenues, and EBIT margins improved by 5.2 percentage points to 30%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Tethys Oil?

Are Tethys Oil Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

A great takeaway for shareholders is that company insiders within Tethys Oil have collectively spent US$415k acquiring shares in the company. While this isn't much, we also note an absence of sales.

Along with the insider buying, another encouraging sign for Tethys Oil is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$190m worth of its stock. This considerable investment should help drive long-term value in the business. That amounts to 12% of the company, demonstrating a degree of high-level alignment with shareholders.

Does Tethys Oil Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Tethys Oil's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. Even so, be aware that Tethys Oil is showing 1 warning sign in our investment analysis , you should know about...

Keen growth investors love to see insider buying. Thankfully, Tethys Oil isn't the only one. You can see a 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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.