Here's Why I Think HIVE Blockchain Technologies (CVE:HIVE) Is An Interesting Stock

Time:2022-01-09 Source: 751 views Trending Copy share

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.


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. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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.

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. It is therefore awe-striking that HIVE Blockchain Technologies's EPS went from US$0.046 to US$0.27 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. HIVE Blockchain Technologies shareholders can take confidence from the fact that EBIT margins are up from 47% to 92%, and revenue is growing. That's great to see, on both counts.

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. For companies with market capitalizations between US$400m and US$1.6b, like HIVE Blockchain Technologies, the median CEO pay is around US$1.1m.

The CEO of HIVE Blockchain Technologies was paid just US$76k in total compensation for the year ending . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Does HIVE Blockchain Technologies Deserve A Spot On Your Watchlist?
HIVE Blockchain Technologies's earnings have taken off like any random crypto-currency did, back in 2017. Such fast EPS growth makes me wonder if the business has hit an inflection point (and I mean the good kind.) Meanwhile, the very reasonable CEO pay reassures me a little, since it points to an absence profligacy. While I couldn't be sure without a deeper dive, it does seem that HIVE Blockchain Technologies has the hallmarks of a quality business; and that would make it well worth watching. We don't want to rain on the parade too much, but we did also find 4 warning signs for HIVE Blockchain Technologies (1 doesn't sit too well with us!) that you need to be mindful of.


By: Simply Wall St

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