Here's Why SigmaTron International (NASDAQ:SGMA) Has Caught The Eye Of Investors

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like SigmaTron International (NASDAQ:SGMA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for SigmaTron International

SigmaTron International's Improving Profits

In the last three years SigmaTron International's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. SigmaTron International boosted its trailing twelve month EPS from US$2.04 to US$2.33, in the last year. That's a 14% gain; respectable growth in the broader scheme of things.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. SigmaTron International maintained stable EBIT margins over the last year, all while growing revenue 9.4% to US$414m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

SigmaTron International isn't a huge company, given its market capitalisation of US$28m. That makes it extra important to check on its balance sheet strength.

Are SigmaTron International Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to SigmaTron International, with market caps under US$200m is around US$747k.

The SigmaTron International CEO received US$603k in compensation for the year ending April 2022. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is SigmaTron International Worth Keeping An Eye On?

One positive for SigmaTron International is that it is growing EPS. That's nice to see. To add to this, the modest CEO compensation should tell investors that the directors have an active interest in delivering the best for shareholders. All things considered, SigmaTron International is definitely worth taking a deeper dive into. You still need to take note of risks, for example - SigmaTron International has 4 warning signs (and 2 which are potentially serious) we think you should know about.

The beauty of investing is that you can invest in almost 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. 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.