CashNews.co
Investors are often guided by the idea of discovering ‘the next big thing’, even if that means buying ‘story stocks’ without any revenue, let alone 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 ECB Water (CVE:BQE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
View our latest analysis for BQE Water
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, BQE Water has grown EPS by 34% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. BQE Water maintained stable EBIT margins over the last year, all while growing revenue 7.0% to CA$18m. That’s a real positive.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
Since BQE Water is no giant, with a market capitalisation of CA$75m, you should definitely check its cash and debt before getting too excited about its prospects.
Theory would suggest that it’s an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in BQE Water will be delighted to know that insiders have shown their belief, holding a large proportion of the company’s shares. In fact, they own 44% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. With that sort of holding, insiders have about CA$33m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!