Here's Why We Think Singapore Telecommunications (SGX:Z74) Is Well Worth Watching

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Singapore Telecommunications (SGX:Z74). 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.

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How Quickly Is Singapore Telecommunications Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Recognition must be given to the that Singapore Telecommunications has grown EPS by 45% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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. It seems Singapore Telecommunications 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. To see the actual numbers, click on the chart.

See our latest analysis for Singapore Telecommunications

Fortunately, we've got access to analyst forecasts of Singapore Telecommunications' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Singapore Telecommunications 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.

The first bit of good news is that no Singapore Telecommunications insiders reported share sales in the last twelve months. Even better, though, is that the Non-Executive Independent Director, Ying-I Yong, bought a whopping S$740k worth of shares, paying about S$3.70 per share, on average. Big buys like that may signal an opportunity; actions speak louder than words.

On top of the insider buying, it's good to see that Singapore Telecommunications insiders have a valuable investment in the business. To be specific, they have S$21m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.03% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Singapore Telecommunications To Your Watchlist?

Singapore Telecommunications' earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Singapore Telecommunications belongs near the top of your watchlist. We should say that we've discovered 3 warning signs for Singapore Telecommunications (1 is significant!) that you should be aware of before investing here.

The good news is that Singapore Telecommunications is not the only stock with insider buying. Here's a list of small cap, undervalued 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.