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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Tye Soon (SGX:BFU). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Tye Soon

Tye Soon's Improving Profits

Over the last three years, Tye Soon has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. To the delight of shareholders, Tye Soon's EPS soared from S$0.051 to S$0.072, over the last year. That's a fantastic gain of 41%.

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. EBIT margins for Tye Soon remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to S$249m. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Tye Soon isn't a huge company, given its market capitalisation of S$34m. That makes it extra important to check on its balance sheet strength.

Are Tye Soon Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

Tye Soon top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the MD & Executive Director, Tek Yew Chong, paid S$223k to buy shares at an average price of S$0.40. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Does Tye Soon Deserve A Spot On Your Watchlist?

You can't deny that Tye Soon has grown its earnings per share at a very impressive rate. That's attractive. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. So on this analysis, Tye Soon is probably worth spending some time on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Tye Soon (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.

The good news is that Tye Soon 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.

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.

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