The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Jardine Cycle & Carriage (SGX:C07). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Jardine Cycle & Carriage with the means to add long-term value to shareholders.

How Quickly Is Jardine Cycle & Carriage Increasing Earnings Per Share?

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) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Jardine Cycle & Carriage has grown EPS by 31% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. It's noted that Jardine Cycle & Carriage's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. EBIT margins for Jardine Cycle & Carriage remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 3.1% to US$22b. That's a real positive.

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

Fortunately, we've got access to analyst forecasts of Jardine Cycle & Carriage's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Jardine Cycle & Carriage 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

First and foremost; there we saw no insiders sell Jardine Cycle & Carriage shares in the last year. But the important part is that Group MD & Director Benjamin Birks spent US$912k buying stock, at an average price of US$30.38. Purchases like this can offer an insight into the faith of the company's management - and it seems to be all positive.

The good news, alongside the insider buying, for Jardine Cycle & Carriage bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$33m worth of its stock. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 0.3%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Jardine Cycle & Carriage's CEO, Ben Birks, is paid at a relatively modest level when compared to other CEOs for companies of this size. Our analysis has discovered that the median total compensation for the CEOs of companies like Jardine Cycle & Carriage with market caps between US$4.0b and US$12b is about US$3.6m.

Jardine Cycle & Carriage's CEO took home a total compensation package worth US$3.2m in the year leading up to December 2023. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is Jardine Cycle & Carriage Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Jardine Cycle & Carriage's strong EPS growth. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. However, before you get too excited we've discovered 2 warning signs for Jardine Cycle & Carriage (1 makes us a bit uncomfortable!) that you should be aware of.

The good news is that Jardine Cycle & Carriage is not the only growth stock with insider buying. Here's a list of growth-focused companies in SG with insider buying in the last three months!

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.