Is Now The Time To Put Bell Equipment (JSE:BEL) On Your Watchlist?

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Bell Equipment (JSE:BEL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Bell Equipment

Bell Equipment's Improving Profits

In the last three years Bell Equipment'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. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, Bell Equipment's EPS soared from R6.11 to R7.78, over the last year. That's a fantastic gain of 27%.

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. Bell Equipment maintained stable EBIT margins over the last year, all while growing revenue 15% to R14b. 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 Bell Equipment is no giant, with a market capitalisation of R3.9b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Bell Equipment Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's nice to see that there have been no reports of any insiders selling shares in Bell Equipment in the previous 12 months. With that in mind, it's heartening that Leon Goosen, the company insider of the company, paid R198k for shares at around R17.57 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Bell Equipment.

It's commendable to see that insiders have been buying shares in Bell Equipment, but there is more evidence of shareholder friendly management. To be specific, the CEO is paid modestly when compared to company peers of the same size. The median total compensation for CEOs of companies similar in size to Bell Equipment, with market caps between R1.8b and R7.1b, is around R13m.

The CEO of Bell Equipment was paid just R559k in total compensation for the year ending December 2023. This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. 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. It can also be a sign of good governance, more generally.

Is Bell Equipment Worth Keeping An Eye On?

You can't deny that Bell Equipment has grown its earnings per share at a very impressive rate. That's attractive. And that's not the only positive either. We have both insider buying and reasonable and remuneration to consider. All in all, this stock is worth the time to delve deeper into the details. You should always think about risks though. Case in point, we've spotted 1 warning sign for Bell Equipment you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Bell Equipment isn't the only one. You can see a a curated list of South African companies which have exhibited consistent growth accompanied by high insider ownership.

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.