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.
If this kind of company isn’t your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Winton Land (NZSE:WIN). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.
Check out our latest analysis for Winton Land
Winton Land’s Improving Profits
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it’s no surprise that some investors are more inclined to invest in profitable businesses. In impressive fashion, Winton Land’s EPS grew from NZ$0.12 to NZ$0.22, over the previous 12 months. It’s a rarity to see 75% year-on-year growth like that. That could be a sign that the business has reached a true inflection point.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it’s a great way for a company to maintain a competitive advantage in the market. The good news is that Winton Land is growing revenues, and EBIT margins improved by 6.6 percentage points to 37%, over the last year. Both of which are great metrics to check off for potential growth.
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.
While it’s always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Winton Land’s balance sheet strength, before getting too excited.
Are Winton Land Insiders Aligned With All Shareholders?
It’s a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. So it is good to see that Winton Land insiders have a significant amount of capital invested in the stock. As a matter of fact, their holding is valued at NZ$26m. That’s a lot of money, and no small incentive to work hard. Despite being just 3.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
While it’s always good to see some strong conviction in the company from insiders through heavy investment, it’s also important for shareholders to ask if management compensation policies are reasonable. Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations between NZ$327m and NZ$1.3b, like Winton Land, the median CEO pay is around NZ$971k.
Winton Land’s CEO took home a total compensation package of NZ$100k in the year prior to June 2023. That’s clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. While the level of CEO compensation shouldn’t be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Does Winton Land Deserve A Spot On Your Watchlist?
Winton Land’s earnings have taken off in quite an impressive fashion. An added bonus for those interested is that management hold a heap of stock and the CEO pay is quite reasonable, illustrating good cash management. The strong EPS improvement suggests the businesses is humming along. Big growth can make big winners, so the writing on the wall tells us that Winton Land is worth considering carefully. Don’t forget that there may still be risks. For instance, we’ve identified 2 warning signs for Winton Land that you should be aware of.
There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of New Zealander companies which have demonstrated growth backed by recent insider purchases.
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.
