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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Top Ramdor Systems & Computers (1990) (TLV:TOPS). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. 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 Top Ramdor Systems & Computers (1990)
How Fast Is Top Ramdor Systems & Computers (1990) 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, Top Ramdor Systems & Computers (1990) has grown EPS by 12% 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. This approach makes Top Ramdor Systems & Computers (1990) look pretty good, on balance; although revenue is flattish, EBIT margins improved from 6.8% to 9.2% in the last year. That’s something to smile about.
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.
TASE:TOPS Earnings and Revenue History May 19th 2021
Since Top Ramdor Systems & Computers (1990) is no giant, with a market capitalization of ₪163m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Top Ramdor Systems & Computers (1990) Insiders Aligned With All Shareholders?
Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Top Ramdor Systems & Computers (1990) insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 55%, 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 ₪90m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. Well, based on the CEO pay, I’d say they are indeed. I discovered that the median total compensation for the CEOs of companies like Top Ramdor Systems & Computers (1990) with market caps under ₪657m is about ₪1.4m.
The Top Ramdor Systems & Computers (1990) CEO received ₪1.1m in compensation for the year ending . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.
Should You Add Top Ramdor Systems & Computers (1990) To Your Watchlist?
One positive for Top Ramdor Systems & Computers (1990) is that it is growing EPS. That’s nice to see. Earnings growth might be the main game for Top Ramdor Systems & Computers (1990), but the fun does not stop there. Boasting both modest CEO pay and considerable insider ownership, I’d argue this one is worthy of the watchlist, at least. Even so, be aware that Top Ramdor Systems & Computers (1990) is showing 4 warning signs in our investment analysis , you should know about…
Although Top Ramdor Systems & Computers (1990) 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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