Here's Why We Think Qualys (NASDAQ:QLYS) Is Well Worth Watching
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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Qualys (NASDAQ:QLYS). 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 Qualys
How Quickly Is Qualys Increasing Earnings Per Share?
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. Shareholders will be happy to know that Qualys' EPS has grown 21% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. Qualys shareholders can take confidence from the fact that EBIT margins are up from 27% to 29%, and revenue is growing. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of Qualys' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Qualys Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a US$6.0b company like Qualys. But we are reassured by the fact they have invested in the company. To be specific, they have US$33m worth of shares. That's a lot of money, and no small incentive to work hard. Despite being just 0.6% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add Qualys To Your Watchlist?
For growth investors, Qualys' raw rate of earnings growth is a beacon in the night. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Qualys is trading on a high P/E or a low P/E, relative to its industry.
While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.
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.
