Many investors, particularly those new to this realm, often find themselves purchasing shares from companies with compelling narratives, even if those companies are not currently profitable. Sadly, such high-risk investments have a slim chance of yielding returns, and numerous investors end up paying a hefty price to grasp this reality. Companies operating at a loss are in a constant struggle against time to achieve financial viability, which indicates that investors in these firms could be assuming more risk than necessary.
In this tech-driven era of ambitious investments, many still lean towards a conventional approach by investing in profitable companies such as Time Finance (LON:TIME). While profitability shouldn’t be the only factor to consider when investing, it is essential to acknowledge companies that can reliably generate profit.
Explore our latest analysis regarding Time Finance
If a company can sustain earnings per share (EPS) growth over time, the share price should ideally mirror that growth. EPS growth is thus a highly desirable trait for any company. Time Finance has managed to grow EPS at an astounding rate of 43% annually over the past three years. While such growth rates may not last indefinitely, they certainly attract the attention of potential investors.
To further validate a company’s growth trajectory, one can examine the changes in its revenue and earnings before interest and tax (EBIT) margins. It is observed that Time Finance’s revenue from operations was lower than the revenue recorded in the last twelve months, which may skew our analysis of its margins. Nevertheless, while Time Finance reported similar EBIT margins to last year, revenue increased by a promising 21% to UK£35m. This is a positive development for the firm!
The chart below illustrates the company’s earnings and revenue growth over time. For more details, click on the image.
Given that Time Finance is not a massive entity, with a market capitalization of UK£46m, it is essential to evaluate its cash and debt situation before getting overly optimistic about its future prospects.
Insider activity can be quite revealing and many investors look for signs of confidence from company insiders through their stock purchases. Such acquisitions might indicate that the buyers perceive the stock as undervalued. However, it’s important to note that insiders can be mistaken, and their motivations for buying may not always be clear.
Interestingly, Time Finance insiders did not sell their shares over the past year, and they also invested UK£44k in buying more shares. This trend is favorable for the company as it reflects a positive outlook for the future. Notably, the most significant insider purchase came from Independent Non-Executive Director Tracy Watkinson, who bought UK£10.0k worth of shares at around UK£0.55 per share.
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The earnings per share growth of Time Finance has been rising steadily, capturing the attention of growth-oriented individuals due to the significant trajectory of EPS growth. This could signify a transformative change in the company’s economic fundamentals. If this holds true, keeping an eye on Time Finance might be wise. However, do remember that there are potential risks involved. For example, we have identified 1 warning sign for Time Finance that warrants your attention.
On a brighter note, Time Finance isn’t the only stock experiencing insider buying. Here’s a list of small-cap, undervalued companies in GB that have seen insider buying in the past three months!
Please be aware that the insider transactions referenced in this article pertain to reportable transactions within the applicable jurisdiction.
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This article by Simply Wall St is intended for general informational purposes. We provide insights based on historical data and analyst projections using an impartial methodology; our articles should not be construed as financial advice. They do not represent a recommendation to buy or sell any stocks and do not take into account your individual circumstances or financial situation. We strive to provide long-term focused analysis driven by fundamental data. Please note that our analysis may not consider recent price-sensitive announcements from companies or qualitative material. Simply Wall St holds no positions in any of the stocks mentioned.
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