Should You Be Adding SATS (SGX:S58) To Your Watchlist 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. 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.

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 SATS (SGX:S58). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide SATS with the means to add long-term value to shareholders.

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SATS' Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that SATS' EPS went from S$0.036 to S$0.16 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.

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. SATS shareholders can take confidence from the fact that EBIT margins are up from 4.7% to 8.2%, and revenue is growing. Both of which are great metrics to check off for potential growth.

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

See our latest analysis for SATS

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

Are SATS Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that SATS insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at S$41m. This considerable investment should help drive long-term value in the business. Despite being just 0.8% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is SATS Worth Keeping An Eye On?

SATS' earnings have taken off in quite an impressive fashion. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. Based on the sum of its parts, we definitely think its worth watching SATS very closely. We should say that we've discovered 1 warning sign for SATS that you should be aware of before investing here.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in SG with promising growth potential and insider confidence.

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.