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.
And in . found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Vontobel Holding (VTX:VONN).
Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself.
Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Vontobel Holding Growing?
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).
It’s no surprise, then, that I like to invest in companies with EPS growth.
Over the last three years, Vontobel Holding has grown EPS by 7.3% per year.
That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
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.
Not all of Vontobel Holding’s revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I’ve used might not be the best representation of the underlying business.
While we note Vontobel Holding’s EBIT margins were flat over the last year, revenue grew by a solid 9.2% to CHF1.2b.
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.
Fortunately, we’ve got access to analyst forecasts of Vontobel Holding’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Vontobel Holding Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners.
So it is good to see that Vontobel Holding insiders have a significant amount of capital invested in the stock.
Indeed, they have a glittering mountain of wealth invested in it, currently valued at CHF289m.
I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Should You Add Vontobel Holding To Your Watchlist?
One important encouraging feature of Vontobel Holding is that it is growing profits.
If that’s not enough on its own, there is also the rather notable levels of insider ownership.
The combination sparks joy for me, so I’d consider keeping the company on a watchlist.
Once you’ve identified a business you like, the next step is to consider what you think it’s worth. And right now is your chance to view our exclusive discounted cashflow valuation of Vontobel Holding. You might benefit from giving it a glance today.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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