If EPS Growth Is Important To You, Innovative Solutions and Support (NASDAQ:ISSC) Presents An Opportunity
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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Innovative Solutions and Support (NASDAQ:ISSC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for Innovative Solutions and Support
How Quickly Is Innovative Solutions and Support Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Innovative Solutions and Support has grown EPS by 21% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. On the revenue front, Innovative Solutions and Support has done well over the past year, growing revenue by 25% to US$35m but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Since Innovative Solutions and Support is no giant, with a market capitalisation of US$140m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Innovative Solutions and Support 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The US$44k worth of shares that insiders sold during the last 12 months pales in comparison to the US$1.7m they spent on acquiring shares in the company. We find this encouraging because it suggests they are optimistic about Innovative Solutions and Support'sfuture. Zooming in, we can see that the biggest insider purchase was by company insider Christopher Harborne for US$1.0m worth of shares, at about US$7.75 per share.
The good news, alongside the insider buying, for Innovative Solutions and Support bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold US$31m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 22% of the shares on issue for the business, an appreciable amount considering the market cap.
Is Innovative Solutions and Support Worth Keeping An Eye On?
You can't deny that Innovative Solutions and Support has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. What about risks? Every company has them, and we've spotted 1 warning sign for Innovative Solutions and Support you should know about.
Keen growth investors love to see insider buying. Thankfully, Innovative Solutions and Support isn't the only one. You can see a a curated list of companies which have exhibited consistent growth accompanied by recent insider 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.
