Should You Be Adding discoverIE Group (LON:DSCV) To Your Watchlist Today?
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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like discoverIE Group (LON:DSCV), which has not only revenues, but also profits. 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.
View our latest analysis for discoverIE Group
How Fast Is discoverIE Group Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. discoverIE Group managed to grow EPS by 9.4% per year, over three years. That's a good rate of growth, if it can be sustained.
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. EBIT margins for discoverIE Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 18% to UK£449m. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for discoverIE Group?
Are discoverIE Group Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Not only did discoverIE Group insiders refrain from selling stock during the year, but they also spent UK£114k buying it. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Group Chief Executive & Executive Director Nicholas Jefferies who made the biggest single purchase, worth UK£61k, paying UK£8.45 per share.
On top of the insider buying, it's good to see that discoverIE Group insiders have a valuable investment in the business. Indeed, they hold UK£11m worth of its stock. This considerable investment should help drive long-term value in the business. Even though that's only about 1.8% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Is discoverIE Group Worth Keeping An Eye On?
One important encouraging feature of discoverIE Group is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Now, you could try to make up your mind on discoverIE Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that discoverIE Group is not the only growth stock with insider buying. Here's a list of them... 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.
