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

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Union Steel Holdings

Union Steel Holdings' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Union Steel Holdings' shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 47%. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. EBIT margins for Union Steel Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to S$108m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Union Steel Holdings isn't a huge company, given its market capitalisation of S$82m. That makes it extra important to check on its balance sheet strength.

Are Union Steel Holdings Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

First things first, there weren't any reports of insiders selling shares in Union Steel Holdings in the last 12 months. Even better, though, is that the Co-Founder & Executive Director, Yew Ang, bought a whopping S$664k worth of shares, paying about S$0.43 per share, on average. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

On top of the insider buying, we can also see that Union Steel Holdings insiders own a large chunk of the company. In fact, they own 77% 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. With that sort of holding, insiders have about S$63m riding on the stock, at current prices. 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. You still need to take note of risks, for example - Union Steel Holdings has 3 warning signs we think you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Union Steel Holdings, you'll probably love this curated collection of companies in SG that have an attractive valuation alongside 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.