Here's Why We Think ONE Group Hospitality (NASDAQ:STKS) Might Deserve Your Attention Today
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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
In contrast to all that, many investors prefer to focus on companies like ONE Group Hospitality (NASDAQ:STKS), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for ONE Group Hospitality
ONE Group Hospitality's Improving Profits
Over the last three years, ONE Group Hospitality has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Impressively, ONE Group Hospitality's EPS catapulted from US$0.29 to US$0.78, over the last year. Year on year growth of 170% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
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. EBIT margins for ONE Group Hospitality remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 51% to US$311m. That's a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. 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 ONE Group Hospitality's future profits.
Are ONE Group Hospitality Insiders Aligned With All Shareholders?
It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. Shareholders will be pleased by the fact that insiders own ONE Group Hospitality shares worth a considerable sum. With a whopping US$52m worth of shares as a group, insiders have plenty riding on the company's success. That holding amounts to 20% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.
Does ONE Group Hospitality Deserve A Spot On Your Watchlist?
ONE Group Hospitality'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. Based on the sum of its parts, we definitely think its worth watching ONE Group Hospitality very closely. However, before you get too excited we've discovered 2 warning signs for ONE Group Hospitality (1 is a bit unpleasant!) that you should be aware of.
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.
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