Does Banyan Tree Holdings (SGX:B58) Deserve A Spot On Your Watchlist?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Banyan Tree Holdings (SGX:B58). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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Banyan Tree Holdings' Improving Profits

Banyan Tree Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. It's good to see that Banyan Tree Holdings' EPS has grown from S$0.043 to S$0.052 over twelve months. There's little doubt shareholders would be happy with that 22% gain.

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. Banyan Tree Holdings maintained stable EBIT margins over the last year, all while growing revenue 12% to S$407m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Check out our latest analysis for Banyan Tree Holdings

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Banyan Tree Holdings Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Banyan Tree Holdings followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. To be specific, they have S$19m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 3.5% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Banyan Tree Holdings Deserve A Spot On Your Watchlist?

One important encouraging feature of Banyan Tree Holdings is that it is growing profits. For those who are looking for a little more than this, the high level of insider ownership enhances our enthusiasm for this growth. The combination definitely favoured by investors so consider keeping the company on a watchlist. Even so, be aware that Banyan Tree Holdings is showing 1 warning sign in our investment analysis , you should know about...

Although Banyan Tree Holdings certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Singaporean companies that not only boast of strong growth but have strong insider backing.

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.