With EPS Growth And More, Audix (TPE:2459) Is Interesting

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 completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Audix (TPE:2459), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Audix

Audix's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Audix boosted its trailing twelve month EPS from NT$3.94 to NT$4.48, in the last year. I doubt many would complain about that 14% gain.

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. Unfortunately, Audix's revenue dropped 13% last year, but the silver lining is that EBIT margins improved from 7.1% to 9.9%. That's not ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Audix isn't a huge company, given its market capitalization of NT$4.9b. That makes it extra important to check on its balance sheet strength.

Are Audix Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Audix shares worth a considerable sum. With a whopping NT$1.4b worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 29% of the stock on issue, thus making insiders influential, and aligned, owners of the business.

Is Audix Worth Keeping An Eye On?

One important encouraging feature of Audix is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Audix that you should be aware of.

Although Audix certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.

If you’re looking to trade Audix, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted

This article by Simply Wall St is general in nature. 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.
^*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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