Here's Why We Think Tiger Brands (JSE:TBS) Is Well Worth Watching

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Tiger Brands (JSE:TBS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Tiger Brands with the means to add long-term value to shareholders.

Our free stock report includes 1 warning sign investors should be aware of before investing in Tiger Brands. Read for free now.

How Quickly Is Tiger Brands Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Tiger Brands' EPS has grown 21% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. It seems Tiger Brands is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not a major concern but nor does it point to the long term growth we like to see.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Check out our latest analysis for Tiger Brands

Fortunately, we've got access to analyst forecasts of Tiger Brands' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Tiger Brands Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

First things first, there weren't any reports of insiders selling shares in Tiger Brands in the last 12 months. Even better, though, is that the Group Executive For Grains Businesses, Tjaart Kruger, bought a whopping R5.0m worth of shares, paying about R268 per share, on average. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

The good news, alongside the insider buying, for Tiger Brands bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a considerable amount of wealth invested in it, currently valued at R2.0b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. The cherry on top is that the CEO, Tjaart Kruger is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Tiger Brands, with market caps between R36b and R117b, is around R30m.

The CEO of Tiger Brands only received R11m in total compensation for the year ending September 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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.

Does Tiger Brands Deserve A Spot On Your Watchlist?

You can't deny that Tiger Brands has grown its earnings per share at a very impressive rate. That's attractive. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. Before you take the next step you should know about the 1 warning sign for Tiger Brands that we have uncovered.

Keen growth investors love to see insider activity. Thankfully, Tiger Brands 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.