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With EPS Growth And More, ONE Group Hospitality (NASDAQ:STKS) Is Interesting

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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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like ONE Group Hospitality (NASDAQ:STKS). 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.

View our latest analysis for ONE Group Hospitality

How Fast Is ONE Group Hospitality Growing Its Earnings Per Share?

In the last three years ONE Group Hospitality'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 firecracker arcing through the night sky, ONE Group Hospitality's EPS shot from US$0.15 to US$0.40, over the last year. You don't see 161% year-on-year growth like that, very often. That could be a sign that the business has reached 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. On the one hand, ONE Group Hospitality's EBIT margins fell over the last year, but on the other hand, revenue grew. So it seems the future my hold further growth, especially if EBIT margins can stabilize.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

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 ONE Group Hospitality's future profits.

Are ONE Group Hospitality 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling ONE Group Hospitality shares, in the last year. With that in mind, it's heartening that Eugene Bullis, the Independent Director of the company, paid US$45k for shares at around US$2.99 each.

On top of the insider buying, it's good to see that ONE Group Hospitality insiders have a valuable investment in the business. With a whopping US$52m worth of shares as a group, insiders have plenty riding on the company's success. At 23% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Does ONE Group Hospitality Deserve A Spot On Your Watchlist?

ONE Group Hospitality's earnings have taken off like any random crypto-currency did, back in 2017. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest ONE Group Hospitality belongs on the top of your watchlist. It is worth noting though that we have found 3 warning signs for ONE Group Hospitality (2 can't be ignored!) that you need to take into consideration.

As a growth investor I do like to see insider buying. But ONE Group Hospitality 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.