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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like VGI Partners Global Investments (ASX:VG1). 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.
VGI Partners Global Investments's Improving Profits
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. VGI Partners Global Investments has grown its trailing twelve month EPS from AU$0.11 to AU$0.11, in the last year. That's a modest gain of 4.1%.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of VGI Partners Global Investments's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. VGI Partners Global Investments maintained stable EBIT margins over the last year, all while growing revenue 22% to AU$98m. 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 it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check VGI Partners Global Investments's balance sheet strength, before getting too excited.
Are VGI Partners Global Investments 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Not only did VGI Partners Global Investments insiders refrain from selling stock during the year, but they also spent AU$254k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. We also note that it was the Independent Director, Lawrence Myers, who made the biggest single acquisition, paying AU$94k for shares at about AU$1.89 each.
On top of the insider buying, it's good to see that VGI Partners Global Investments insiders have a valuable investment in the business. Indeed, they hold AU$22m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 2.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Is VGI Partners Global Investments Worth Keeping An Eye On?
As I already mentioned, VGI Partners Global Investments is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. We should say that we've discovered 1 warning sign for VGI Partners Global Investments that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of VGI Partners Global Investments, you'll probably love this free list of growing companies that insiders are buying.
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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