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Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Victory Capital Holdings (NASDAQ:VCTR). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
Victory Capital Holdings's Improving Profits
Over the last three years, Victory Capital Holdings 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, Victory Capital Holdings's EPS shot from US$1.37 to US$3.14, over the last year. Year on year growth of 128% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.
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. The good news is that Victory Capital Holdings is growing revenues, and EBIT margins improved by 7.0 percentage points to 43%, over the last year. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Victory Capital Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Victory Capital Holdings Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.
One shining light for Victory Capital Holdings is the serious outlay one insider has made to buy shares, in the last year. In one fell swoop, Independent Director James Hawkes, spent US$554k, at a price of US$13.96 per share. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.
On top of the insider buying, it's good to see that Victory Capital Holdings insiders have a valuable investment in the business. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$128m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Is Victory Capital Holdings Worth Keeping An Eye On?
Victory Capital Holdings's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Victory Capital Holdings deserves timely attention. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Victory Capital Holdings , and understanding it should be part of your investment process.
As a growth investor I do like to see insider buying. But Victory Capital Holdings 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.
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