Yahoo Finance Is Now The Time To Put Softchoice (TSE:SFTC) On Your Watchlist?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Softchoice (TSE:SFTC). 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.
View our latest analysis for Softchoice
How Quickly Is Softchoice Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Softchoice has grown EPS by 34% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. Softchoice's EBIT margins have actually improved by 2.7 percentage points in the last year, to reach 9.2%, but, on the flip side, revenue was down 15%. That falls short of ideal.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Softchoice?
Are Softchoice 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, Chief Financial Officer Jonathan Roiter spent US$88k acquiring shares, doing so at an average price of US$17.23. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.
Along with the insider buying, another encouraging sign for Softchoice is that insiders, as a group, have a considerable shareholding. To be specific, they have US$68m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 6.3% of the company, demonstrating a degree of high-level alignment with shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Andrew Caprara, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Softchoice with market caps between US$400m and US$1.6b is about US$1.9m.
Softchoice offered total compensation worth US$1.5m to its CEO in the year to December 2023. That is actually below the median for CEO's of similarly sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Does Softchoice Deserve A Spot On Your Watchlist?
You can't deny that Softchoice has grown its earnings per share at a very impressive rate. That's attractive. Better still, insiders own a large chunk of the company and one has even been buying more shares. Astute investors will want to keep this stock on watch. You should always think about risks though. Case in point, we've spotted 4 warning signs for Softchoice you should be aware of, and 1 of them shouldn't be ignored.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Softchoice, you'll probably love this curated collection of companies in CA that have an attractive valuation alongside 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.
