Does JB Foods (SGX:BEW) Deserve A Spot On Your Watchlist?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 JB Foods (SGX:BEW). 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.

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JB Foods' Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that JB Foods grew its EPS from US$0.085 to US$0.37, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. This could point to the business hitting a point of inflection.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The music to the ears of JB Foods shareholders is that EBIT margins have grown from 6.6% to 11% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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.

See our latest analysis for JB Foods

JB Foods isn't a huge company, given its market capitalisation of S$236m. That makes it extra important to check on its balance sheet strength.

Are JB Foods 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's nice to see that there have been no reports of any insiders selling shares in JB Foods in the previous 12 months. With that in mind, it's heartening that Lee Goh, the Executive Director of the company, paid US$61k for shares at around US$0.61 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in JB Foods.

Along with the insider buying, another encouraging sign for JB Foods is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at US$19m. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 8.0% of the company; visible skin in the game.

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 on our analysis the CEO, How Keong Tey, is paid less than the median for similar sized companies. For companies with market capitalisations between US$100m and US$400m, like JB Foods, the median CEO pay is around US$737k.

JB Foods' CEO took home a total compensation package worth US$595k in the year leading up to December 2024. That comes in below the average for similar sized companies and seems pretty reasonable. 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 good governance, more generally.

Should You Add JB Foods To Your Watchlist?

JB Foods' earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest JB Foods belongs near the top of your watchlist. It is worth noting though that we have found 3 warning signs for JB Foods that you need to take into consideration.

The good news is that JB Foods is not the only stock with insider buying. Here's a list of small cap, undervalued companies in SG 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.