If You Like EPS Growth Then Check Out Taiwan Cement (TPE:1101) Before It's Too Late

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. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Taiwan Cement (TPE:1101). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Taiwan Cement

How Quickly Is Taiwan Cement Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. I, for one, am blown away by the fact that Taiwan Cement has grown EPS by 42% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Unfortunately, Taiwan Cement's revenue dropped 4.1% last year, but the silver lining is that EBIT margins improved from 23% to 27%. That's not ideal.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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

Are Taiwan Cement Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a NT$252b company like Taiwan Cement. But we are reassured by the fact they have invested in the company. Indeed, they hold NT$553m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 0.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Does Taiwan Cement Deserve A Spot On Your Watchlist?

Taiwan Cement's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So to my mind Taiwan Cement is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Even so, be aware that Taiwan Cement is showing 4 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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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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.
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