Do Telkom SA SOC’s (JSE:TKG) Earnings Warrant Your Attention?

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. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Telkom SA SOC (JSE:TKG), which has not only revenues, but also profits. 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.

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Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So EPS growth can certainly encourage an investor to take note of a stock. Outstandingly, Telkom SA SOC’s EPS shot from R2.98 to R5.56, over the last year. It’s not often a company can achieve year-on-year growth of 87%.

One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Telkom SA SOC shareholders can take confidence from the fact that EBIT margins are up from 7.5% to 9.9%, 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. For finer detail, click on the image.

See our latest analysis for Telkom SA SOC

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don’t exist, you can check our visualization of consensus analyst forecasts for Telkom SA SOC’s future EPS 100% free.

It’s a good habit to check into a company’s remuneration policies to ensure that the CEO and management team aren’t putting their own interests before that of the shareholder with excessive salary packages. Our analysis has discovered that the median total compensation for the CEOs of companies like Telkom SA SOC with market caps between R17b and R56b is about R23m.

The Telkom SA SOC CEO received R20m in compensation for the year ending March 2025. That is actually below the median for CEO’s of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it’s reasonable, that gives 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.

Telkom SA SOC’s earnings have taken off in quite an impressive fashion. This appreciable increase in earnings could be a sign of an upward trajectory for the company. What’s more, the fact that the CEO’s compensation is quite reasonable is a sign that the company is conscious of excessive spending. So faced with these facts, it seems that researching this stock a little more may lead you to discover an investment opportunity that meets your quality standards. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Telkom SA SOC is trading on a high P/E or a low P/E, relative to its industry.

There’s always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of South African companies which have demonstrated growth backed by significant insider holdings.

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.