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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Palatin Technologies (NYSEMKT:PTN). While profit is not necessarily a social good, it's easy to admire a business than 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.
How Fast Is Palatin Technologies Growing Its Earnings Per Share?
In the last three years Palatin Technologies's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, Palatin Technologies's EPS soared from US$0.12 to US$0.17, in just one year. That's a commendable gain of 38%.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Palatin Technologies's EBIT margins have actually improved by 20.7 percentage points in the last year, to reach 59%, but, on the flip side, revenue was down 10%. That's not ideal.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Palatin Technologies's future profits.
Are Palatin Technologies Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We note that Palatin Technologies insiders spent US$154k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was CFO, COO Stephen Wills who made the biggest single purchase, worth US$43k, paying US$0.86 per share.
Should You Add Palatin Technologies To Your Watchlist?
You can't deny that Palatin Technologies has grown its earnings per share at a very impressive rate. That's attractive. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. So on this analysis I believe Palatin Technologies is probably worth spending some time on. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Palatin Technologies shapes up to industry peers, when it comes to ROE.
The good news is that Palatin Technologies 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
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.