Nasdaq
华尔街日报Does BQE Water (CVE:BQE) Deserve A Spot On Your Watchlist?
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 currently lacks a track record of revenue and 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like BQE Water (CVE:BQE). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
BQE Water's Earnings Per Share Are Growing
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. BQE Water's shareholders have have plenty to be happy about as their annual EPS growth for the last 3 years was 49%. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. BQE Water shareholders can take confidence from the fact that EBIT margins are up from 6.5% to 18%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.
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.
Check out our latest analysis for BQE Water
Since BQE Water is no giant, with a market capitalisation of CA$73m, you should definitely check its cash and debt before getting too excited about its prospects.
Are BQE Water Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Insiders both bought and sold BQE Water shares in the last year, but the good news is they spent CA$15k more buying than they netted selling. When you weigh that up, it is a mild positive, indicating increased alignment between shareholders and management. Zooming in, we can see that the biggest insider purchase was by company insider Songlin Ye for CA$11k worth of shares, at about CA$52.50 per share.
These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for BQE Water will reveal that insiders own a significant piece of the pie. Owning 44% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. To give you an idea, the value of insiders' holdings in the business are valued at CA$32m at the current share price. That should be more than enough to keep them focussed on creating shareholder value!
Does BQE Water Deserve A Spot On Your Watchlist?
BQE Water's earnings per share growth have been climbing higher at an appreciable rate. 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 BQE Water belongs near the top of your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with BQE Water (at least 1 which doesn't sit too well with us) , and understanding these should be part of your investment process.
Keen growth investors love to see insider activity. Thankfully, BQE Water isn't the only one. You can see a a curated list of Canadian companies which have exhibited consistent growth accompanied by high insider ownership.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.