Investors are often guided by the idea of discovering “the next big thing,” even if that means buying “story stocks” without generating revenue, let alone profit. But as Peter Lynch wrote in One step ahead on Wall Street“Risk assessments almost never pay off.” A well-financed company may incur losses for years, but at some point it must generate profits, otherwise investors will withdraw and the company will go under.
Although we are in the era of high-sky investing in technology stocks, many investors still follow a more traditional strategy. They buy shares of profitable companies such as United Foreign Insurance (SGX:U13). While profit is not the only metric to consider when investing, it is worth identifying companies that can generate it consistently.
Check out our latest analysis for United Overseas Insurance
How fast is United Overseas Insurance growing?
Generally speaking, companies that show earnings per share (EPS) growth should show similar trends in share price. This means that EPS growth is considered a real positive by most successful long-term investors. United Overseas Insurance was able to grow its earnings per share by 5.1% per year over three years. While this kind of growth rate is nothing special, it does show that the company is growing.
One way to check a company’s growth is to look at how its revenue and earnings before interest and tax (EBIT) are changing. The good news is that United Overseas Insurance is growing its revenue and EBIT margins have increased by 9.9 percentage points to 33% over the last year. Both are great metrics to check off for potential growth.
The following chart shows how the company’s earnings and revenue have changed over time. Click on the image to get more detailed information.
While rising profits are always good, you should always remember that a weak balance sheet can come back to haunt you, so check United Overseas Insurance’s balance sheet strength before you get too excited.
Are United Overseas Insurance insiders on the same page as all shareholders?
Investors should feel comfortable owning shares in a company when insiders also own shares, making their interests closely aligned. Shareholders will be pleased to know that insiders own a significant amount of United Overseas Insurance shares. Specifically, they own S$58 million worth of shares. This shows a significant level of ownership and may indicate conviction in the business strategy. These holdings represent over 14% of the company; visible self-interest.
Does United Overseas Insurance deserve a place on your watchlist?
As mentioned, United Overseas Insurance is a growing company, which is encouraging. If that alone isn’t enough, there are also the rather notable levels of insider ownership. This combination is definitely favored by investors, so you should put the company on a watchlist. Nevertheless, you should be aware of the 2 warning signs we have identified at United Overseas Insurance (including 1 which is of some concern).
There is always the possibility of buying shares that are not increasing yields and not Insiders have been buying shares. But for those who consider these important metrics, we recommend looking at companies that Do have these features. You can access a customized list of Singapore companies whose growth is supported by significant insider ownership.
Please note that the insider transactions discussed in this article are reportable transactions in the respective jurisdiction.
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This Simply Wall St article is of a general nature. We comment solely on the basis of historical data and analyst forecasts, using an unbiased methodology. Our articles do not constitute financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.
