Yahoo Finance Here's Why We Think PWR Holdings (ASX:PWH) 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. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 PWR Holdings (ASX:PWH). 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.
See our latest analysis for PWR Holdings
PWR Holdings' Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. PWR Holdings managed to grow EPS by 13% per year, over three years. That's a good rate of growth, if it can be sustained.
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. PWR Holdings maintained stable EBIT margins over the last year, all while growing revenue 20% to AU$130m. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. 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 PWR Holdings' future profits.
Are PWR Holdings 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Shareholders in PWR Holdings will be more than happy to see insiders committing themselves to the company, spending AU$564k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Director Roland Dane for AU$400k worth of shares, at about AU$9.71 per share.
On top of the insider buying, it's good to see that PWR Holdings insiders have a valuable investment in the business. With a whopping AU$148m worth of shares as a group, insiders have plenty riding on the company's success. At 13% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because PWR Holdings' CEO, Kees Weel, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between AU$601m and AU$2.4b, like PWR Holdings, the median CEO pay is around AU$1.6m.
The PWR Holdings CEO received AU$983k in compensation for the year ending June 2023. That is actually below the median for CEO's of similarly 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.
Is PWR Holdings Worth Keeping An Eye On?
One important encouraging feature of PWR Holdings is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of PWR Holdings. You might benefit from giving it a glance today.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of PWR Holdings, you'll probably love this curated collection of companies in AU that have an attractive valuation alongside 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
