Yahoo Finance Do Westgold Resources's (ASX:WGX) Earnings Warrant Your Attention?
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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like Westgold Resources (ASX:WGX). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Check out our latest analysis for Westgold Resources
How Fast Is Westgold Resources Growing Its Earnings Per Share?
In the last three years Westgold Resources's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Westgold Resources's EPS shot from AU$0.036 to AU$0.087, over the last year. You don't see 140% year-on-year growth like that, very often.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Westgold Resources is growing revenues, and EBIT margins improved by 5.4 percentage points to 4.3%, over the last year. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Westgold Resources EPS 100% free.
Are Westgold Resources Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
It's good to see Westgold Resources insiders walking the walk, by spending AU$479k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. It is also worth noting that it was Executive Chairman Peter Cook who made the biggest single purchase, worth AU$449k, paying AU$2.25 per share.
On top of the insider buying, it's good to see that Westgold Resources insiders have a valuable investment in the business. Indeed, they hold AU$24m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 2.7% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
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. The cherry on top is that the CEO, Debbie Fullarton is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between AU$544m and AU$2.2b, like Westgold Resources, the median CEO pay is around AU$1.3m.
The Westgold Resources CEO received total compensation of just AU$342k in the year to . That's clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. I'd also argue reasonable pay levels attest to good decision making more generally.
Does Westgold Resources Deserve A Spot On Your Watchlist?
Westgold Resources's earnings per share have taken off like a rocket aimed right at the moon. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest Westgold Resources belongs on the top of your watchlist. Still, you should learn about the 3 warning signs we've spotted with Westgold Resources .
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Westgold Resources, 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.
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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