Does Union Steel Holdings (SGX:ZB9) Deserve A Spot On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
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 Union Steel Holdings (SGX:ZB9). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Union Steel Holdings with the means to add long-term value to shareholders.
Check out our latest analysis for Union Steel Holdings
How Fast Is Union Steel Holdings Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Union Steel Holdings has grown EPS by 47% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note Union Steel Holdings achieved similar EBIT margins to last year, revenue grew by a solid 14% to S$108m. That's a real positive.
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.
Since Union Steel Holdings is no giant, with a market capitalisation of S$81m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Union Steel Holdings 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
One shining light for Union Steel Holdings is the serious outlay one insider has made to buy shares, in the last year. In one fell swoop, Co-Founder & Executive Director Yew Ang, spent S$603m, at a price of S$20,100 per share. It doesn't get much better than that, in terms of large investments from insiders.
On top of the insider buying, we can also see that Union Steel Holdings insiders own a large chunk of the company. Indeed, with a collective holding of 77%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have S$62m invested in the business, at the current share price. That's nothing to sneeze at!
Does Union Steel Holdings Deserve A Spot On Your Watchlist?
Union Steel Holdings' earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Union Steel Holdings deserves timely attention. Still, you should learn about the 2 warning signs we've spotted with Union Steel Holdings.
The good news is that Union Steel Holdings is not the only stock with insider buying. Here's a list of small cap, undervalued companies in SG 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.
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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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com