Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Da-Cin ConstructionLtd (TPE:2535). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Quickly Is Da-Cin ConstructionLtd Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. Da-Cin ConstructionLtd managed to grow EPS by 4.0% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.
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. While we note Da-Cin ConstructionLtd's EBIT margins were flat over the last year, revenue grew by a solid 20% to NT$14b. 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.
Da-Cin ConstructionLtd isn't a huge company, given its market capitalization of NT$8.0b. That makes it extra important to check on its balance sheet strength.
Are Da-Cin ConstructionLtd Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Da-Cin ConstructionLtd shares worth a considerable sum. Indeed, they hold NT$1.1b worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 13% of the company; visible skin in the game.
Does Da-Cin ConstructionLtd Deserve A Spot On Your Watchlist?
As I already mentioned, Da-Cin ConstructionLtd is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. However, before you get too excited we've discovered 2 warning signs for Da-Cin ConstructionLtd that you should be aware of.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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