Yahoo Finance Here's Why I Think Steppe Cement (LON:STCM) Is An Interesting Stock
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like Steppe Cement (LON:STCM). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
See our latest analysis for Steppe Cement
How Fast Is Steppe Cement Growing Its Earnings Per Share?
In the last three years Steppe Cement's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Steppe Cement boosted its trailing twelve month EPS from US$0.049 to US$0.06, in the last year. I doubt many would complain about that 24% gain.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Steppe Cement maintained stable EBIT margins over the last year, all while growing revenue 5.1% to US$81m. 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 Steppe Cement is no giant, with a market capitalization of UK£85m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Steppe Cement Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. 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.
Steppe Cement top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the , Azmi Hamzah, paid US$146k to buy shares at an average price of US$0.29.
The good news, alongside the insider buying, for Steppe Cement bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$27m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 31% of the company; visible skin in the game.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Javier del Ser Perez is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations under US$200m, like Steppe Cement, the median CEO pay is around US$327k.
The Steppe Cement CEO received total compensation of only US$30k in the year to . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.
Should You Add Steppe Cement To Your Watchlist?
One positive for Steppe Cement is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. We should say that we've discovered 3 warning signs for Steppe Cement that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Steppe Cement, 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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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.
