For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Warren Buffett has mused, ‘If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.’ When they buy such story stocks, investors are all too often the patsy.
So if you’re like me, you might be more interested in profitable, growing companies, like Lime Technologies (STO:LIME). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 Lime Technologies
Lime Technologies’s Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). It’s no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, Lime Technologies has grown EPS by 17% 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. Lime Technologies shareholders can take confidence from the fact that EBIT margins are up from 13% to 18%, and revenue is growing. 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.
OM:LIME Income Statement, March 19th 2020
Since Lime Technologies is no giant, with a market capitalization of kr1.6b, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Lime Technologies 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 Lime Technologies insiders have a significant amount of capital invested in the stock. To be specific, they have kr315m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 19% of the company; visible skin in the game.
Should You Add Lime Technologies To Your Watchlist?
As I already mentioned, Lime Technologies is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Even so, be aware that Lime Technologies is showing 3 warning signs in our investment analysis , you should know about…
Although Lime Technologies certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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