Here’s why Patec Precision Industry (TWSE:2236) has caught investors’ attention

Investors are often driven by the idea of ​​finding “the next big thing,” even if it means buying “star stocks” with no income, let alone profit. But as Peter Lynch said in Ahead of Wall Street“Long-term hits almost never pay off.” A loss-making company has not yet proven itself in terms of profits, and eventually the inflow of external capital may dry up.

In contrast to all this, many investors prefer to focus on companies like Patec Precision Industry (TWSE:2236), which generates not only revenue but also profits. Although profit is not the only metric to consider when investing, it is worth recognizing companies that can consistently produce it.

Check out our latest analysis for Patec Precision Industry

How fast is Patec Precision Industry growing its earnings per share?

If a company can sustain earnings per share (EPS) growth for long enough, its share price should eventually follow. So it makes sense for experienced investors to pay close attention to a company’s EPS when conducting investment research. Shareholders will be pleased to learn that Patec Precision Industry’s EPS has grown by 25% each year, compounded, over three years. As a general rule of thumb, we’d say that if a company can keep up the pace that some kind of growth, shareholders will be delighted.

A close look at revenue growth and earnings before interest and tax (EBIT) margins can help form a view of the sustainability of the recent earnings growth. On the one hand, Patec Precision Industry’s EBIT margins have fallen over the last year, but on the other hand, revenue has grown. If EBIT margins manage to remain balanced and this revenue growth continues, then we should see better days ahead.

The chart below shows how the company’s financial results and revenue have changed over time. To see the actual numbers, click on the chart.

Given that Patec Precision Industry is not a giant, with a market capitalization of NT$4.4b, you should definitely check its cash and debt. Before to be too enthusiastic about one’s prospects.

Are Patec Precision industry insiders aligned with all shareholders?

It’s nice to see company executives putting their money where their mouth is, so to speak, as it increases the incentive alignment between the people running the company and its true owners. So it’s good to see that Patec Precision Industry insiders have invested a significant amount of capital in the stock. In fact, their stake is valued at NT$684 million. This shows significant commitment and may indicate conviction in the business strategy. In percentage terms, this represents 16% of the company’s shares outstanding, a sizeable amount considering the market capitalization.

Should you add Patec Precision Industry to your watchlist?

For investors looking for growth, Patec Precision Industry’s gross earnings growth rate is a beacon in the night. This EPS growth rate is something the company can be proud of, so it’s no surprise that insiders own a considerable portion of the stock. Growth and insider confidence are well regarded, so it’s worth investigating further to determine the stock’s true value. It’s always necessary to consider the ever-present specter of investment risk. We have identified 1 warning sign with Patec Precision Industry, and understanding this should be part of your investment process.

There is always the possibility of doing well by buying stocks that are not profit growth and not have insiders buying shares. But for those taking these important measures into account, we encourage you to check out the companies that TO DO have these characteristics. You can access a personalized list of Taiwanese companies that have demonstrated growth supported by significant internal participations.

Please note that insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to constitute financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. Our goal is to provide you with focused, long-term analysis based on fundamental data. Please note that our analysis may not factor in the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any of the stocks mentioned.

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