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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Second Chance Properties (SGX:528). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Second Chance Properties

Second Chance Properties' Earnings Per Share Are 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. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that Second Chance Properties' EPS has grown 35% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. Second Chance Properties shareholders can take confidence from the fact that EBIT margins are up from 33% to 40%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Second Chance Properties isn't a huge company, given its market capitalisation of S$222m. That makes it extra important to check on its balance sheet strength.

Are Second Chance Properties Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

In the last year insider at Second Chance Properties were both selling and buying shares; but happily, as a group they spent S$219k more on stock, than they netted from selling it. Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. We also note that it was the Founder, Mohamed Salleh Marican, who made the biggest single acquisition, paying S$360k for shares at about S$0.22 each.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Second Chance Properties will reveal that insiders own a significant piece of the pie. Indeed, with a collective holding of 85%, company insiders are in control and have plenty of capital behind the venture. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. To give you an idea, the value of insiders' holdings in the business are valued at S$189m at the current share price. So there's plenty there to keep them focused!

Does Second Chance Properties Deserve A Spot On Your Watchlist?

For growth investors, Second Chance Properties' raw rate of earnings growth is a beacon in the night. 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. However, before you get too excited we've discovered 2 warning signs for Second Chance Properties that you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Second Chance Properties isn't the only one. You can see a a free list of them here.

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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