Here's Why We Think 4Sight Holdings (JSE:4SI) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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.

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 4Sight Holdings (JSE:4SI). 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 4Sight Holdings

4Sight Holdings' Improving Profits

In the last three years 4Sight Holdings' 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. Outstandingly, 4Sight Holdings' EPS shot from R0.017 to R0.029, over the last year. It's not often a company can achieve year-on-year growth of 70%.

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. 4Sight Holdings maintained stable EBIT margins over the last year, all while growing revenue 21% to R696m. That's progress.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Since 4Sight Holdings is no giant, with a market capitalisation of R149m, you should definitely check its cash and debt before getting too excited about its prospects.

Are 4Sight Holdings Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So as you can imagine, the fact that 4Sight Holdings insiders own a significant number of shares certainly is appealing. In fact, they own 69% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Although, with 4Sight Holdings being valued at R149m, this is a small company we're talking about. That means insiders only have R104m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. The median total compensation for CEOs of companies similar in size to 4Sight Holdings, with market caps under R3.7b is around R6.1m.

4Sight Holdings' CEO took home a total compensation package worth R4.1m in the year leading up to December 2022. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is 4Sight Holdings Worth Keeping An Eye On?

4Sight Holdings' earnings per share growth have been climbing higher at an appreciable rate. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The drastic earnings growth indicates the business is going from strength to strength. Hopefully a trend that continues well into the future. Big growth can make big winners, so the writing on the wall tells us that 4Sight Holdings is worth considering carefully. We don't want to rain on the parade too much, but we did also find 2 warning signs for 4Sight Holdings (1 is a bit unpleasant!) that you need to be mindful of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.