Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Bell Equipment (JSE:BEL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for Bell Equipment
How Fast Is Bell Equipment Growing Its Earnings Per Share?
In the last three years Bell Equipment's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Bell Equipment's EPS shot from R3.33 to R6.11, over the last year. It's not often a company can achieve year-on-year growth of 84%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.
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. The good news is that Bell Equipment is growing revenues, and EBIT margins improved by 2.5 percentage points to 7.7%, over the last year. That's great to see, on both counts.
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 Bell Equipment is no giant, with a market capitalisation of R1.8b, you should definitely check its cash and debt before getting too excited about its prospects.
Are Bell Equipment 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
In the last twelve months Bell Equipment insiders spent R251k on stock; good news for shareholders. While this isn't much, we also note an absence of sales. It is also worth noting that it was Group CEO & Executive Director Leon Goosen who made the biggest single purchase, worth R198k, paying R17.57 per share.