Should You Be Adding National Tyre & Wheel (ASX:NTD) To Your Watchlist Today?

Simply Wall St
·4 min read

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily 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.

So if you're like me, you might be more interested in profitable, growing companies, like National Tyre & Wheel (ASX:NTD). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 National Tyre & Wheel

How Quickly Is National Tyre & Wheel Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Who among us would not applaud National Tyre & Wheel's stratospheric annual EPS growth of 37%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). National Tyre & Wheel maintained stable EBIT margins over the last year, all while growing revenue 76% to AU$291m. That's progress.

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.

earnings-and-revenue-history
earnings-and-revenue-history

National Tyre & Wheel isn't a huge company, given its market capitalization of AU$101m. That makes it extra important to check on its balance sheet strength.

Are National Tyre & Wheel Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

We haven't seen any insiders selling National Tyre & Wheel shares, in the last year. So it's definitely nice that Independent Non-Executive Chairman Murray Boyte bought AU$35k worth of shares at an average price of around AU$0.88.

On top of the insider buying, we can also see that National Tyre & Wheel insiders own a large chunk of the company. In fact, they own 37% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have AU$37m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add National Tyre & Wheel To Your Watchlist?

National Tyre & Wheel's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe National Tyre & Wheel deserves timely attention. Still, you should learn about the 4 warning signs we've spotted with National Tyre & Wheel .

The good news is that National Tyre & Wheel is not the only growth stock with insider buying. Here's a list of them... 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.

This article by Simply Wall St is general in nature. 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.

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