Should You Be Adding Promate ElectronicLtd (TPE:6189) To Your Watchlist Today?

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. 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 Promate ElectronicLtd (TPE:6189), 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. 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 Promate ElectronicLtd

How Quickly Is Promate ElectronicLtd 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. We can see that in the last three years Promate ElectronicLtd grew its EPS by 15% per year. That's a good rate of growth, if it can be sustained.

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. Promate ElectronicLtd maintained stable EBIT margins over the last year, all while growing revenue 17% to NT$27b. That's a real positive.

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.

Promate ElectronicLtd isn't a huge company, given its market capitalization of NT$7.1b. That makes it extra important to check on its balance sheet strength.

Are Promate ElectronicLtd 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. So it is good to see that Promate ElectronicLtd insiders have a significant amount of capital invested in the stock. Indeed, they hold NT$674m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 9.4% of the company, demonstrating a degree of high-level alignment with shareholders.

Is Promate ElectronicLtd Worth Keeping An Eye On?

As I already mentioned, Promate ElectronicLtd is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. You still need to take note of risks, for example - Promate ElectronicLtd has 2 warning signs (and 1 which is significant) we think you should know about.

Although Promate ElectronicLtd 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.

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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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