Does Tai Sin Electric (SGX:500) Deserve A Spot On Your Watchlist?

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. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

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 Tai Sin Electric (SGX:500). 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.

Check out our latest analysis for Tai Sin Electric

How Quickly Is Tai Sin Electric Increasing Earnings Per Share?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Tai Sin Electric's EPS has grown 21% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Tai Sin Electric maintained stable EBIT margins over the last year, all while growing revenue 27% to S$379m. 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.

Tai Sin Electric isn't a huge company, given its market capitalisation of S$184m. That makes it extra important to check on its balance sheet strength.

Are Tai Sin Electric 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

While we did see insider selling of Tai Sin Electric stock in the last year, one single insider spent plenty more buying. Specifically the CEO & Executive Director, Boon Hock Lim, spent S$633k, paying about S$0.39 per share. That can definitely be seen as a sign of conviction.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Tai Sin Electric will reveal that insiders own a significant piece of the pie. Indeed, with a collective holding of 64%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. With that sort of holding, insiders have about S$118m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Does Tai Sin Electric Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Tai Sin Electric's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. Astute investors will want to keep this stock on watch. Still, you should learn about the 1 warning sign we've spotted with Tai Sin Electric.

The good news is that Tai Sin Electric is not the only growth stock with insider buying. Here's a list of them... 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.

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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