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Should You Be Adding Image Resources (ASX:IMA) To Your Watchlist Today?

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Simply Wall St
·4 min read
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Image Resources (ASX:IMA). 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.

Check out our latest analysis for Image Resources

How Fast Is Image Resources Growing Its Earnings Per Share?

Over the last three years, Image Resources has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Image Resources's EPS shot from AU$0.011 to AU$0.029, over the last year. Year on year growth of 157% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Image Resources is growing revenues, and EBIT margins improved by 15.9 percentage points to 34%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

Since Image Resources is no giant, with a market capitalization of AU$159m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Image Resources Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Image Resources shares, in the last year. So it's definitely nice that Independent Non-Executive Chairman Robert Besley bought AU$19k worth of shares at an average price of around AU$0.19.

Is Image Resources Worth Keeping An Eye On?

Image Resources's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. For me, this situation certainly piques my interest. Now, you could try to make up your mind on Image Resources by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

As a growth investor I do like to see insider buying. But Image Resources isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.