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.
In contrast to all that, I prefer to spend time on companies like Supernus Pharmaceuticals (NASDAQ:SUPN), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Supernus Pharmaceuticals Growing?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, Supernus Pharmaceuticals has grown EPS by 5.9% per year. While that sort of growth rate isn't amazing, it does show the business is growing.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Supernus Pharmaceuticals's EBIT margins were flat over the last year, revenue grew by a solid 7.0% to US$408m. That's a real positive.
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.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Supernus Pharmaceuticals?
Are Supernus Pharmaceuticals Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Like a sturdy phalanx Supernus Pharmaceuticals insiders have stood united by refusing to sell shares over the last year. But my excitement comes from the US$190k that Founder Jack Khattar spent buying shares (at an average price of about US$26.39).
Along with the insider buying, another encouraging sign for Supernus Pharmaceuticals is that insiders, as a group, have a considerable shareholding. To be specific, they have US$43m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 3.3% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Is Supernus Pharmaceuticals Worth Keeping An Eye On?
One positive for Supernus Pharmaceuticals is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. 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 Supernus Pharmaceuticals is trading on a high P/E or a low P/E, relative to its industry.
The good news is that Supernus Pharmaceuticals 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 email@example.com. 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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