- Oops!Something went wrong.Please try again later.
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 Tourmaline Oil (TSE:TOU), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Tourmaline Oil with the means to add long-term value to shareholders.
How Fast Is Tourmaline Oil Growing Its Earnings Per Share?
Tourmaline Oil has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Tourmaline Oil's EPS grew from CA$3.24 to CA$6.09, over the previous 12 months. It's not often a company can achieve year-on-year growth of 88%. That could be a sign that the business has reached a true inflection point.
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. The good news is that Tourmaline Oil is growing revenues, and EBIT margins improved by 14.6 percentage points to 31%, over the last year. Ticking those two boxes is a good sign of growth, in our book.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Tourmaline Oil's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Tourmaline Oil 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Although we did see some insider selling (worth CA$689k) this was overshadowed by a mountain of buying, totalling CA$6.4m in just one year. This bodes well for Tourmaline Oil as it highlights the fact that those who are important to the company having a lot of faith in its future. It is also worth noting that it was Chairman of the Board Michael Rose who made the biggest single purchase, worth CA$698k, paying CA$69.80 per share.
Along with the insider buying, another encouraging sign for Tourmaline Oil is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth CA$1.4b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Mike Rose, is paid less than the median for similar sized companies. For companies with market capitalisations over CA$10b, like Tourmaline Oil, the median CEO pay is around CA$11m.
The Tourmaline Oil CEO received CA$5.6m in compensation for the year ending December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add Tourmaline Oil To Your Watchlist?
Tourmaline Oil's earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Tourmaline Oil belongs near the top of your watchlist. Still, you should learn about the 3 warning signs we've spotted with Tourmaline Oil.
The good news is that Tourmaline Oil is not the only growth stock with insider buying. Here's a list of them... 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.