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Here's Why We Think Locality Planning Energy Holdings (ASX:LPE) Might Deserve Your Attention Today

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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Locality Planning Energy Holdings (ASX:LPE), which has not only revenues, but also profits. 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 Locality Planning Energy Holdings

How Fast Is Locality Planning Energy Holdings Growing Its Earnings Per Share?

Locality Planning Energy Holdings has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, Locality Planning Energy Holdings' EPS grew from AU$0.015 to AU$0.034, over the previous 12 months. It's a rarity to see 130% year-on-year growth like that. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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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. The music to the ears of Locality Planning Energy Holdings shareholders is that EBIT margins have grown from 4.5% to 13% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
earnings-and-revenue-history

Locality Planning Energy Holdings isn't a huge company, given its market capitalisation of AU$9.8m. That makes it extra important to check on its balance sheet strength.

Are Locality Planning Energy 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Shareholders in Locality Planning Energy Holdings will be more than happy to see insiders committing themselves to the company, spending AU$1.1m 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. We also note that it was the company insider, Simons Brooklyn, who made the biggest single acquisition, paying AU$185k for shares at about AU$0.10 each.

On top of the insider buying, we can also see that Locality Planning Energy Holdings insiders own a large chunk of the company. In fact, they own 36% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Of course, Locality Planning Energy Holdings is a very small company, with a market cap of only AU$9.8m. So despite a large proportional holding, insiders only have AU$3.5m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Should You Add Locality Planning Energy Holdings To Your Watchlist?

Locality Planning Energy Holdings' earnings per share growth have been climbing higher at an appreciable rate. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Locality Planning Energy Holdings deserves timely attention. Even so, be aware that Locality Planning Energy Holdings is showing 5 warning signs in our investment analysis , and 3 of those don't sit too well with us...

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Locality Planning Energy Holdings, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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