Should You Be Adding Civmec (SGX:P9D) To Your Watchlist 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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Civmec (SGX:P9D). 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.

Check out our latest analysis for Civmec

How Fast Is Civmec Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Civmec has managed to grow EPS by 30% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

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). Civmec's EBIT margins have actually improved by 4.6 percentage points in the last year, to reach 6.4%, but, on the flip side, revenue was down 20%. That's not ideal.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Civmec isn't a huge company, given its market capitalization of S$291m. That makes it extra important to check on its balance sheet strength.

Are Civmec Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Civmec shares, in the last year. So it's definitely nice that Independent Director Douglas Chester bought AU$8.8k worth of shares at an average price of around AU$0.44.

On top of the insider buying, it's good to see that Civmec insiders have a valuable investment in the business. Given insiders own a small fortune of shares, currently valued at AU$95m, they have plenty of motivation to push the business to succeed. At 33% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Is Civmec Worth Keeping An Eye On?

For growth investors like me, Civmec's raw rate of earnings growth is a beacon in the night. Better still, insiders own a large chunk of the company and one has even been buying more shares. So I do think this is one stock worth watching. What about risks? Every company has them, and we've spotted 2 warning signs for Civmec (of which 1 is concerning!) you should know about.

The good news is that Civmec is not the only growth stock with insider buying. Here's a list of them... 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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