With EPS Growth And More, YouGov (LON:YOU) Makes An Interesting Case
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 YouGov (LON:YOU). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
View our latest analysis for YouGov
YouGov's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. To the delight of shareholders, YouGov has achieved impressive annual EPS growth of 49%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.
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. While we note YouGov achieved similar EBIT margins to last year, revenue grew by a solid 17% to UK£258m. That's a real positive.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of YouGov's forecast profits?
Are YouGov Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. YouGov followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Indeed, they have a considerable amount of wealth invested in it, currently valued at UK£93m. Investors will appreciate management having this amount of skin in the game as it shows their commitment to the company's future.
Should You Add YouGov To Your Watchlist?
YouGov's earnings have taken off in quite an impressive fashion. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering YouGov for a spot on your watchlist. It is worth noting though that we have found 2 warning signs for YouGov that you need to take into consideration.
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.
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.
