With EPS Growth And More, Shine Justice (ASX:SHJ) Is Interesting
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Shine Justice (ASX:SHJ). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
View our latest analysis for Shine Justice
How Quickly Is Shine Justice Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Shine Justice grew its EPS by 10% per year. That's a good rate of growth, if it can be sustained.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Shine Justice's EBIT margins were flat over the last year, revenue grew by a solid 5.9% to AU$193m. That's progress.
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 at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Shine Justice?
Are Shine Justice Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Not only did Shine Justice insiders refrain from selling stock during the year, but they also spent AU$209k buying it. That's nice to see, because it suggests insiders are optimistic. We also note that it was the Non-Executive Director, Rodney Douglas, who made the biggest single acquisition, paying AU$56k for shares at about AU$0.88 each.
On top of the insider buying, we can also see that Shine Justice insiders own a large chunk of the company. Indeed, with a collective holding of 53%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about AU$142m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!
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, Simon Morrison is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between AU$135m and AU$540m, like Shine Justice, the median CEO pay is around AU$739k.
Shine Justice offered total compensation worth AU$564k to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. 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. It can also be a sign of good governance, more generally.
Does Shine Justice Deserve A Spot On Your Watchlist?
As I already mentioned, Shine Justice is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. We should say that we've discovered 2 warning signs for Shine Justice that you should be aware of before investing here.
As a growth investor I do like to see insider buying. But Shine Justice isn't the only one. You can see a a free list of them here.
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. 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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