Yahoo Finance I Built A List Of Growing Companies And Scientific Digital Imaging (LON:SDI) Made The Cut
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Scientific Digital Imaging (LON:SDI). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for Scientific Digital Imaging
Scientific Digital Imaging's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. As a tree reaches steadily for the sky, Scientific Digital Imaging's EPS has grown 21% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Scientific Digital Imaging maintained stable EBIT margins over the last year, all while growing revenue 20% to UK£17m. That's progress.
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 Scientific Digital Imaging is no giant, with a market capitalization of UK£57m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Scientific Digital Imaging Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We note that Scientific Digital Imaging insiders spent UK£103k on stock, over the last year; in contrast, we didn't see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. Zooming in, we can see that the biggest insider purchase was by Chairman of the Board Eric Ford for UK£36k worth of shares, at about UK£0.36 per share.
It's me that Scientific Digital Imaging insiders are buying the stock, but that's not the only reason to think leader are fair to shareholders. Specifically, the CEO is paid quite reasonably for a company of this size. I discovered that the median total compensation for the CEOs of companies like Scientific Digital Imaging with market caps under UK£156m is about UK£247k.
Scientific Digital Imaging offered total compensation worth UK£204k to its CEO in the year to April 2019. That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.
Is Scientific Digital Imaging Worth Keeping An Eye On?
You can't deny that Scientific Digital Imaging has grown its earnings per share at a very impressive rate. That's attractive. And that's not the only positive, either. We have both insider buying and reasonable and remuneration to consider. The message I'd take from this quick rundown is that, yes, this stock is worth investigating further. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Scientific Digital Imaging is trading on a high P/E or a low P/E, relative to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Scientific Digital Imaging, 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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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
