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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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Syneos Health (NASDAQ:SYNH). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
How Fast Is Syneos Health Growing Its Earnings Per Share?
In the last three years Syneos Health'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, Syneos Health's EPS shot from US$0.83 to US$1.84, over the last year. You don't see 121% year-on-year growth like that, very often.
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. Syneos Health's EBIT margins are flat but, of some concern, its revenue is actually down. And that does make me a little more cautious of the stock.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Syneos Health EPS 100% free.
Are Syneos Health Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We note that Syneos Health insiders spent US$178k on stock, over the last year; in contrast, we didn't see any selling. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was Chief Financial Officer Jason Meggs who made the biggest single purchase, worth US$131k, paying US$36.75 per share.
On top of the insider buying, it's good to see that Syneos Health insiders have a valuable investment in the business. Indeed, they hold US$13m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.2% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add Syneos Health To Your Watchlist?
Syneos Health's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. What's more insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Syneos Health deserves timely attention. What about risks? Every company has them, and we've spotted 2 warning signs for Syneos Health (of which 1 can't be ignored!) you should know about.
As a growth investor I do like to see insider buying. But Syneos Health 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.
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