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Here's Why I Think JEMTEC (CVE:JTC) Is An Interesting Stock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without 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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like JEMTEC (CVE:JTC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for JEMTEC

How Fast Is JEMTEC Growing Its Earnings Per Share?

Over the last three years, JEMTEC has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. JEMTEC has grown its trailing twelve month EPS from CA$0.16 to CA$0.16, in the last year. That amounts to a small improvement of 4.0%.

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Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. This approach makes JEMTEC look pretty good, on balance; although revenue is flattish, EBIT margins improved from 23% to 27% in the last year. That's something to smile about.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
earnings-and-revenue-history

JEMTEC isn't a huge company, given its market capitalization of CA$4.9m. That makes it extra important to check on its balance sheet strength.

Are JEMTEC Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that JEMTEC insiders own a significant number of shares certainly appeals to me. Actually, with 48% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, JEMTEC is a very small company, with a market cap of only CA$4.9m. So despite a large proportional holding, insiders only have CA$2.3m worth of stock. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is JEMTEC Worth Keeping An Eye On?

One positive for JEMTEC is that it is growing EPS. That's nice to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Before you take the next step you should know about the 4 warning signs for JEMTEC (1 makes us a bit uncomfortable!) that we have uncovered.

You can invest in 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.

This article by Simply Wall St is general in nature. 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.

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