If EPS Growth Is Important To You, Sasfin Holdings (JSE:SFN) Presents An Opportunity

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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Sasfin Holdings (JSE:SFN). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for Sasfin Holdings

How Quickly Is Sasfin Holdings Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Over the last three years, Sasfin Holdings has grown EPS by 9.1% per year. That's a good rate of growth, if it can be sustained.

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. It's noted that Sasfin Holdings' revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Sasfin Holdings achieved similar EBIT margins to last year, revenue grew by a solid 15% to R1.3b. That's progress.

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.

Since Sasfin Holdings is no giant, with a market capitalisation of R969m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Sasfin Holdings Insiders Aligned With All Shareholders?

It's a good habit to check into a company's remuneration policies to ensure that the CEO and management team aren't putting their own interests before that of the shareholder with excessive salary packages. The median total compensation for CEOs of companies similar in size to Sasfin Holdings, with market caps under R3.6b is around R5.3m.

The Sasfin Holdings CEO received R4.7m in compensation for the year ending June 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Should You Add Sasfin Holdings To Your Watchlist?

One positive for Sasfin Holdings is that it is growing EPS. That's nice to see. On top of that, our faith in the board of directors is strengthened by the fact of the reasonable CEO pay. So all in all Sasfin Holdings is worthy at least considering for your watchlist. Don't forget that there may still be risks. For instance, we've identified 5 warning signs for Sasfin Holdings (2 can't be ignored) you should be aware of.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you 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. 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.