Yahoo Finance Does Stingray Group (TSE:RAY.A) Deserve A Spot On Your Watchlist?
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Stingray Group (TSE:RAY.A). 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.
View our latest analysis for Stingray Group
How Fast Is Stingray Group 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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Stingray Group has managed to grow EPS by 34% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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 Stingray Group is growing revenues, and EBIT margins improved by 7.7 percentage points to 26%, over the last year. Ticking those two boxes is a good sign of growth, in our book.
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Stingray Group.
Are Stingray Group 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, small purchases are not always indicative of conviction, and insiders don't always get it right.
It's pleasing to note that insiders spent CA$2.2m buying Stingray Group shares, over the last year, without reporting any share sales whatsoever. Knowing this, Stingray Group will have have all eyes on them in anticipation for the what could happen in the near future. We also note that it was the Independent Chairman, Mark Pathy, who made the biggest single acquisition, paying CA$584k for shares at about CA$5.08 each.
Along with the insider buying, another encouraging sign for Stingray Group is that insiders, as a group, have a considerable shareholding. Given insiders own a significant chunk of shares, currently valued at CA$119m, they have plenty of motivation to push the business to succeed. At 27% of the company, the co-investment by insiders fosters confidence that management will make long-term focussed decisions.
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 Stingray Group's CEO, Eric Boyko, 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 Stingray Group with market caps between CA$270m and CA$1.1b is about CA$1.8m.
The Stingray Group CEO received CA$1.2m in compensation for the year ending March 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. 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.
Should You Add Stingray Group To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Stingray Group's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. Still, you should learn about the 2 warning signs we've spotted with Stingray Group.
The good news is that Stingray Group is not the only growth stock with insider buying. Here's a list of growth-focused companies in CA 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.
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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.
