Here's Why Union Steel Holdings (SGX:ZB9) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Union Steel Holdings (SGX:ZB9). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Union Steel Holdings

Union Steel Holdings' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that Union Steel Holdings has grown EPS by 47% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Union Steel Holdings maintained stable EBIT margins over the last year, all while growing revenue 14% to S$108m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Union Steel Holdings is no giant, with a market capitalisation of S$50m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Union Steel Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Union Steel Holdings top brass are certainly in sync, not having sold any shares, over the last year. But the real excitement comes from the S$231k that Co-Founder & Executive Director Yew Ang spent buying shares (at an average price of about S$0.29). Purchases like this clue us in to the to the faith management has in the business' future.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Union Steel Holdings insiders own more than a third of the company. In fact, they own 76% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at S$38m at the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Does Union Steel Holdings Deserve A Spot On Your Watchlist?

Union Steel Holdings' earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Union Steel Holdings deserves timely attention. However, before you get too excited we've discovered 3 warning signs for Union Steel Holdings that you should be aware of.

The good news is that Union Steel Holdings is not the only growth stock with insider buying. Here's a list of growth-focused companies in SG 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. 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.