Here's Why We Think Stamford Tyres (SGX:S29) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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 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 Stamford Tyres (SGX:S29). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Stamford Tyres with the means to add long-term value to shareholders.

View our latest analysis for Stamford Tyres

How Fast Is Stamford Tyres Growing Its Earnings Per Share?

Over the last three years, Stamford Tyres has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Stamford Tyres' EPS shot up from S$0.01 to S$0.016; a result that's bound to keep shareholders happy. That's a fantastic gain of 56%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. It seems Stamford Tyres is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Stamford Tyres isn't a huge company, given its market capitalisation of S$55m. That makes it extra important to check on its balance sheet strength.

Are Stamford Tyres Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that Stamford Tyres insiders own a meaningful share of the business. In fact, they own 36% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Of course, Stamford Tyres is a very small company, with a market cap of only S$55m. That means insiders only have S$20m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is Stamford Tyres Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Stamford Tyres' strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. We don't want to rain on the parade too much, but we did also find 4 warning signs for Stamford Tyres (3 are potentially serious!) that you need to be mindful of.

Although Stamford Tyres certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.