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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 Intercede Group (LON:IGP). 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.
Intercede Group's Improving Profits
In the last three years Intercede Group'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. As a result, I'll zoom in on growth over the last year, instead. Like a firecracker arcing through the night sky, Intercede Group's EPS shot from UK£0.0089 to UK£0.02, over the last year. Year on year growth of 123% is certainly a sight to behold.
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. The good news is that Intercede Group is growing revenues, and EBIT margins improved by 11.3 percentage points to 11%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
Since Intercede Group is no giant, with a market capitalization of UK£35m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Intercede Group 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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We haven't seen any insiders selling Intercede Group shares, in the last year. So it's definitely nice that CEO & Director Klaas van der Leest bought UK£26k worth of shares at an average price of around UK£0.52.
Should You Add Intercede Group To Your Watchlist?
Intercede Group's earnings have taken off like any random crypto-currency did, back in 2017. Growth investors should find it difficult to look past that strong EPS move. And indeed, it could be a sign that the business is at an inflection point. If that's the case, you may regret neglecting to put Intercede Group on your watchlist. What about risks? Every company has them, and we've spotted 3 warning signs for Intercede Group (of which 1 makes us a bit uncomfortable!) you should know about.
As a growth investor I do like to see insider buying. But Intercede Group 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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