Dicker Data (ASX:DDR) Ticks All The Boxes When It Comes To Earnings Growth
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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Dicker Data (ASX:DDR). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for Dicker Data
How Fast Is Dicker Data 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. It certainly is nice to see that Dicker Data has managed to grow EPS by 19% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. While we note Dicker Data achieved similar EBIT margins to last year, revenue grew by a solid 39% to AU$2.9b. That's a real positive.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Dicker Data's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Dicker Data Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Despite AU$512k worth of sales, Dicker Data insiders have overwhelmingly been buying the stock, spending AU$1.2m on purchases in the last twelve months. This overall confidence in the company at current the valuation signals their optimism. We also note that it was the COO & Executive Director, Vladimir Mitnovetski, who made the biggest single acquisition, paying AU$175k for shares at about AU$10.05 each.
And the insider buying isn't the only sign of alignment between shareholders and the board, since Dicker Data insiders own more than a third of the company. In fact, they own 64% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. And their holding is extremely valuable at the current share price, totalling AU$1.1b. That means they have plenty of their own capital riding on the performance of the business!
Should You Add Dicker Data To Your Watchlist?
For growth investors, Dicker Data's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say that this stock may well deserve a spot on your watchlist. It is worth noting though that we have found 3 warning signs for Dicker Data (2 are potentially serious!) that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Dicker Data, you'll probably love this free list of growing companies that insiders are buying.
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.
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