Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
In contrast to all that, I prefer to spend time on companies like HIVE Blockchain Technologies (CVE:HIVE), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
See our latest analysis for HIVE Blockchain Technologies
How Fast Is HIVE Blockchain Technologies Growing Its Earnings Per Share?
In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that HIVE Blockchain Technologies grew its EPS from US$0.43 to US$1.84, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
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). HIVE Blockchain Technologies shareholders can take confidence from the fact that EBIT margins are up from 75% to 87%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my 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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of HIVE Blockchain Technologies’s forecast profits?
Are HIVE Blockchain Technologies Insiders Aligned With All Shareholders?
I always like to check up on CEO compensation, because I think that reasonable pay levels, around or below the median, can be a sign that shareholder interests are well considered. I discovered that the median total compensation for the CEOs of companies like HIVE Blockchain Technologies with market caps between US$200m and US$800m is about US$1.1m.
The HIVE Blockchain Technologies CEO received total compensation of just US$76k in the year to . That’s clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Does HIVE Blockchain Technologies Deserve A Spot On Your Watchlist?
HIVE Blockchain Technologies’s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. With rocketing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. Meanwhile, the very reasonable CEO pay reassures me a little, since it points to an absence profligacy. So HIVE Blockchain Technologies looks like it could be a good quality growth stock, at first glance. That’s worth watching. Even so, be aware that HIVE Blockchain Technologies is showing 4 warning signs in our investment analysis , and 2 of those don’t sit too well with us…
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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.