Yahoo Finance Here's Why I Think Thorney Technologies (ASX:TEK) 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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Thorney Technologies (ASX:TEK). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
See our latest analysis for Thorney Technologies
How Fast Is Thorney Technologies Growing Its Earnings Per Share?
In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Thorney Technologies grew its EPS from AU$0.00078 to AU$0.12, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?
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. Not all of Thorney Technologies's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. The good news is that Thorney Technologies is growing revenues, and EBIT margins improved by 68.5 percentage points to 78%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
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.
Since Thorney Technologies is no giant, with a market capitalization of AU$181m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Thorney Technologies Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, 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.
The good news is that Thorney Technologies insiders spent a whopping AU$4.4m on stock in just one year, and I didn't see any selling. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. It is also worth noting that it was Janel Cameron who made the biggest single purchase, worth AU$2.7m, paying AU$0.38 per share.
On top of the insider buying, it's good to see that Thorney Technologies insiders have a valuable investment in the business. To be specific, they have AU$34m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 19% of the company; visible skin in the game.
Does Thorney Technologies Deserve A Spot On Your Watchlist?
Thorney Technologies's earnings per share have taken off like a rocket aimed right at the moon. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Thorney Technologies deserves timely attention. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Thorney Technologies (at least 1 which is concerning) , and understanding these should be part of your investment process.
The good news is that Thorney Technologies is not the only growth stock with insider buying. Here's a list of them... 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.
