Is Now The Time To Put TWOWAY Communications (TWSE:8045) On Your Watchlist?

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 currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like TWOWAY Communications (TWSE:8045), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide TWOWAY Communications with the means to add long-term value to shareholders.

See our latest analysis for TWOWAY Communications

TWOWAY Communications' Improving Profits

Over the last three years, TWOWAY Communications has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. TWOWAY Communications' EPS skyrocketed from NT$2.86 to NT$4.38, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 54%.

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. TWOWAY Communications maintained stable EBIT margins over the last year, all while growing revenue 36% to NT$2.3b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since TWOWAY Communications is no giant, with a market capitalisation of NT$7.1b, you should definitely check its cash and debt before getting too excited about its prospects.

Are TWOWAY Communications Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, 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 TWOWAY Communications insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at NT$937m. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 13% of the company; visible skin in the game.

Should You Add TWOWAY Communications To Your Watchlist?

For growth investors, TWOWAY Communications' raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. What about risks? Every company has them, and we've spotted 2 warning signs for TWOWAY Communications you should know about.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in TW with promising growth potential and insider confidence.

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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.