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Should You Be Adding ShaMaran Petroleum (CVE:SNM) To Your Watchlist Today?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. 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 ShaMaran Petroleum (CVE:SNM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ShaMaran Petroleum with the means to add long-term value to shareholders.

View our latest analysis for ShaMaran Petroleum

How Fast Is ShaMaran Petroleum Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for ShaMaran Petroleum to have grown EPS from US$0.012 to US$0.039 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. On the revenue front, ShaMaran Petroleum has done well over the past year, growing revenue by 50% to US$181m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. So it seems the future may hold further growth, especially if EBIT margins can remain steady.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Since ShaMaran Petroleum is no giant, with a market capitalisation of CA$169m, you should definitely check its cash and debt before getting too excited about its prospects.

Are ShaMaran Petroleum 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the real excitement comes from the US$128k that President Garrett Soden spent buying shares (at an average price of about US$0.064). It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Should You Add ShaMaran Petroleum To Your Watchlist?

ShaMaran Petroleum's earnings per share have been soaring, with growth rates sky high. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If that's the case, you may regret neglecting to put ShaMaran Petroleum on your watchlist. Still, you should learn about the 3 warning signs we've spotted with ShaMaran Petroleum (including 2 which are potentially serious).

The good news is that ShaMaran Petroleum 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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