It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
In contrast to all that, I prefer to spend time on companies like A-Mark Precious Metals (NASDAQ:AMRK), which has not only revenues, but also profits. 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.
A-Mark Precious Metals's Improving Profits
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. It is therefore awe-striking that A-Mark Precious Metals's EPS went from US$0.31 to US$4.34 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. While we note A-Mark Precious Metals's EBIT margins were flat over the last year, revenue grew by a solid 14% to US$5.5b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since A-Mark Precious Metals is no giant, with a market capitalization of US$225m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are A-Mark Precious Metals Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that A-Mark Precious Metals insiders have a significant amount of capital invested in the stock. With a whopping US$52m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 23% of the stock on issue, thus making insiders influential, and aligned, owners of the business.
Is A-Mark Precious Metals Worth Keeping An Eye On?
A-Mark Precious Metals's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering A-Mark Precious Metals for a spot on your watchlist. Before you take the next step you should know about the 4 warning signs for A-Mark Precious Metals (2 are concerning!) that we have uncovered.
Although A-Mark Precious Metals certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article by Simply Wall St is general in nature. 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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