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If EPS Growth Is Important To You, Brimstone Investment (JSE:BRT) Presents An Opportunity
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Brimstone Investment (JSE:BRT), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for Brimstone Investment
Brimstone Investment's Improving Profits
Over the last three years, Brimstone Investment 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. In previous twelve months, Brimstone Investment's EPS has risen from R1.26 to R1.38. That's a modest gain of 9.7%.
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. Brimstone Investment maintained stable EBIT margins over the last year, all while growing revenue 14% to R5.6b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Brimstone Investment is no giant, with a market capitalisation of R1.5b, you should definitely check its cash and debt before getting too excited about its prospects.
Are Brimstone Investment Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Brimstone Investment insiders have a significant amount of capital invested in the stock. Indeed, they hold R374m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 25% of the shares on issue for the business, an appreciable amount considering the market cap.
Does Brimstone Investment Deserve A Spot On Your Watchlist?
One important encouraging feature of Brimstone Investment is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination is very appealing. So yes, we do think the stock is worth keeping an eye on. You should always think about risks though. Case in point, we've spotted 5 warning signs for Brimstone Investment you should be aware of, and 2 of them are significant.
Although Brimstone Investment certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.
Valuation is complex, but we're here to simplify it.
Discover if Brimstone Investment might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About JSE:BRT
Brimstone Investment
An investment holding company, engages in the food, healthcare, property, restricted B-BBEE, and enterprise development businesses in South Africa, Australia, Europe, and internationally.
Slight and slightly overvalued.