Here's Why We Think Goldsun Building Materials (TPE:2504) Is Well Worth Watching

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

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Goldsun Building Materials (TPE:2504). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Goldsun Building Materials

How Quickly Is Goldsun Building Materials Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Goldsun Building Materials's stratospheric annual EPS growth of 50%, compound, 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.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Goldsun Building Materials's EBIT margins have actually improved by 7.6 percentage points in the last year, to reach 9.7%, but, on the flip side, revenue was down 4.3%. That's not ideal.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Goldsun Building Materials's forecast profits?

Are Goldsun Building Materials 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. So it is good to see that Goldsun Building Materials insiders have a significant amount of capital invested in the stock. To be specific, they have NT$1.1b worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 3.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Should You Add Goldsun Building Materials To Your Watchlist?

Goldsun Building Materials'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 yes, on this short analysis I do think it's worth considering Goldsun Building Materials for a spot on your watchlist. Even so, be aware that Goldsun Building Materials is showing 1 warning sign in our investment analysis , you should know about...

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

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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