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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Braemar Shipping Services (LON:BMS). 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.
How Fast Is Braemar Shipping Services Growing Its Earnings Per Share?
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Braemar Shipping Services' EPS has risen over the last 12 months, growing from UK£0.32 to UK£0.39. There's little doubt shareholders would be happy with that 22% gain.
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. EBIT margins for Braemar Shipping Services remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 13% to UK£116m. That's progress.
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.
Since Braemar Shipping Services is no giant, with a market capitalisation of UK£98m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Braemar Shipping Services 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
In the last year insider at Braemar Shipping Services were both selling and buying shares; but happily, as a group they spent UK£71k more on stock, than they netted from selling it. Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. Zooming in, we can see that the biggest insider purchase was by Group CEO & Executive Director James Christopher Gundy for UK£48k worth of shares, at about UK£2.10 per share.
On top of the insider buying, it's good to see that Braemar Shipping Services insiders have a valuable investment in the business. To be specific, they have UK£15m worth of shares. This considerable investment should help drive long-term value in the business. That amounts to 15% of the company, demonstrating a degree of high-level alignment with shareholders.
Does Braemar Shipping Services Deserve A Spot On Your Watchlist?
As previously touched on, Braemar Shipping Services is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Braemar Shipping Services , and understanding this should be part of your investment process.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Braemar Shipping Services, you'll probably love this free list of growing companies that insiders are buying.
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.
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