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. 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Superior Gold (CVE:SGI). 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.
How Fast Is Superior Gold Growing Its Earnings Per Share?
In the last three years Superior Gold'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. In impressive fashion, Superior Gold's EPS grew from US$0.024 to US$0.064, over the previous 12 months. It's a rarity to see 164% year-on-year growth like that.
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. The music to the ears of Superior Gold shareholders is that EBIT margins have grown from -0.5% to 10% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
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.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Superior Gold.
Are Superior Gold 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Any way you look at it Superior Gold shareholders can gain quiet confidence from the fact that insiders shelled out US$478k to buy stock, over the last year. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. It is also worth noting that it was company insider Mark Wellings who made the biggest single purchase, worth CA$280k, paying CA$0.56 per share.
Does Superior Gold Deserve A Spot On Your Watchlist?
Superior Gold's earnings per share have been soaring, with growth rates sky high. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And may very well signal a significant inflection point for the business. If this is the case, then keeping a watch over Superior Gold could be in your best interest. You still need to take note of risks, for example - Superior Gold has 2 warning signs we think you should be aware of.
Keen growth investors love to see insider buying. Thankfully, Superior Gold isn't the only one. You can see a 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.