Yahoo Finance Does Tourmaline Oil (TSE:TOU) Deserve A Spot On Your Watchlist?
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. 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 Tourmaline Oil (TSE:TOU), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Tourmaline Oil
How Fast Is Tourmaline Oil Growing Its Earnings Per Share?
In the last three years Tourmaline Oil'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. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Tourmaline Oil's EPS grew from CA$5.56 to CA$16.31, over the previous 12 months. Year on year growth of 193% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.
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. Tourmaline Oil shareholders can take confidence from the fact that EBIT margins are up from 23% to 101%, and revenue is growing. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Tourmaline Oil's future EPS 100% free.
Are Tourmaline Oil Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The CA$689k worth of shares that insiders sold during the last 12 months pales in comparison to the CA$6.1m they spent on acquiring shares in the company. This adds to the interest in Tourmaline Oil because it suggests that those who understand the company best, are optimistic. Zooming in, we can see that the biggest insider purchase was by Chairman of the Board Michael Rose for CA$763k worth of shares, at about CA$77.43 per share.
On top of the insider buying, it's good to see that Tourmaline Oil insiders have a valuable investment in the business. Notably, they have an enviable stake in the company, worth CA$1.5b. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
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. The cherry on top is that the CEO, Mike Rose is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Tourmaline Oil, with market caps over CA$11b, is around CA$10m.
Tourmaline Oil offered total compensation worth CA$5.6m to its CEO in the year to December 2021. That is actually below the median for CEO's of similarly sized companies. 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.
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. What about risks? Every company has them, and we've spotted 4 warning signs for Tourmaline Oil (of which 2 are a bit concerning!) you should know about.
Keen growth investors love to see insider buying. Thankfully, Tourmaline Oil 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.
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.
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