Advertisement
Australia markets closed
  • ALL ORDS

    8,050.20
    -23.90 (-0.30%)
     
  • ASX 200

    7,788.10
    -25.50 (-0.33%)
     
  • AUD/USD

    0.6467
    -0.0073 (-1.11%)
     
  • OIL

    85.45
    +0.43 (+0.51%)
     
  • GOLD

    2,360.20
    -12.50 (-0.53%)
     
  • Bitcoin AUD

    103,240.96
    -1,315.08 (-1.26%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • AUD/EUR

    0.6073
    -0.0017 (-0.29%)
     
  • AUD/NZD

    1.0885
    -0.0012 (-0.11%)
     
  • NZX 50

    11,931.32
    -2.99 (-0.03%)
     
  • NASDAQ

    18,003.49
    -304.50 (-1.66%)
     
  • FTSE

    7,995.58
    +71.78 (+0.91%)
     
  • Dow Jones

    37,983.24
    -475.84 (-1.24%)
     
  • DAX

    17,930.32
    -24.16 (-0.13%)
     
  • Hang Seng

    16,721.69
    -373.34 (-2.18%)
     
  • NIKKEI 225

    39,523.55
    +80.92 (+0.21%)
     

Do South32's (ASX:S32) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like South32 (ASX:S32). 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.

View our latest analysis for South32

How Fast Is South32 Growing Its Earnings Per Share?

South32 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. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, South32's EPS grew from US$0.22 to US$0.51, over the previous 12 months. It's a rarity to see 136% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.

ADVERTISEMENT

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. While we note South32 achieved similar EBIT margins to last year, revenue grew by a solid 26% to US$9.0b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

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

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of South32's forecast profits?

Are South32 Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

In the last twelve months South32 insiders spent US$32k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling.

The good news, alongside the insider buying, for South32 bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at US$45m. This considerable investment should help drive long-term value in the business. Even though that's only about 0.2% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is South32 Worth Keeping An Eye On?

South32's earnings have taken off in quite an impressive fashion. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest South32 belongs near the top of your watchlist. However, before you get too excited we've discovered 2 warning signs for South32 (1 makes us a bit uncomfortable!) that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of South32, 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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here