Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone 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 SS&C Technologies Holdings (NASDAQ:SSNC). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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 SS&C Technologies Holdings Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Who among us would not applaud SS&C Technologies Holdings's stratospheric annual EPS growth of 38%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.
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. SS&C Technologies Holdings shareholders can take confidence from the fact that EBIT margins are up from 17% to 20%, and revenue is growing. That's great to see, on both counts.
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.
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 SS&C Technologies Holdings's future profits.
Are SS&C Technologies Holdings Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
While SS&C Technologies Holdings insiders did net -US$810.4k selling stock over the last year, they invested US$1.3m, a much higher figure. On balance, to me, this signals their optimism. We also note that it was the Independent Director, Michael Zamkow, who made the biggest single acquisition, paying US$1.0m for shares at about US$59.76 each.
The good news, alongside the insider buying, for SS&C Technologies Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$1.6b. That equates to 13% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Does SS&C Technologies Holdings Deserve A Spot On Your Watchlist?
SS&C Technologies Holdings's earnings have taken off like any random crypto-currency did, back in 2017. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest SS&C Technologies Holdings belongs on the top of your watchlist. Still, you should learn about the 3 warning signs we've spotted with SS&C Technologies Holdings (including 1 which is a bit unpleasant) .
The good news is that SS&C Technologies Holdings 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.
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.
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