Yahoo Finance Here's Why We Think Porvair (LON:PRV) Might Deserve Your Attention Today
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. 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. 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 Porvair (LON:PRV). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Porvair
How Quickly Is Porvair Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, Porvair has grown EPS by 11% per year. That growth rate is fairly good, assuming the company can keep it up.
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. Porvair maintained stable EBIT margins over the last year, all while growing revenue 18% to UK£173m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Porvair's future profits.
Are Porvair Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We haven't seen any insiders selling Porvair shares, in the last year. So it's definitely nice that Group Finance Director & Director James Mills bought UK£32k worth of shares at an average price of around UK£5.83. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Porvair.
Recent insider purchases of Porvair stock is not the only way management has kept the interests of the general public shareholders in mind. Namely, Porvair has a very reasonable level of CEO pay. The median total compensation for CEOs of companies similar in size to Porvair, with market caps between UK£166m and UK£666m, is around UK£874k.
Porvair offered total compensation worth UK£665k to its CEO in the year to November 2021. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add Porvair To Your Watchlist?
As previously touched on, Porvair is a growing business, which is encouraging. And there's more to love too, with modest CEO remuneration and insider buying interest continuing the positives for the company. If these factors aren't enough to secure Porvair a spot on the watchlist, then it certainly warrants a closer look at the very least. Of course, just because Porvair is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Porvair, 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.
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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