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Here's Why We Think Vita Life Sciences (ASX:VLS) Might Deserve Your Attention Today

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 currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Vita Life Sciences (ASX:VLS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Vita Life Sciences with the means to add long-term value to shareholders.

Check out our latest analysis for Vita Life Sciences

Vita Life Sciences' Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. We can see that in the last three years Vita Life Sciences grew its EPS by 13% per year. That's a pretty good rate, if the company can sustain it.

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 Vita Life Sciences remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to AU$74m. That's encouraging news for the company!

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.

earnings-and-revenue-history
earnings-and-revenue-history

Since Vita Life Sciences is no giant, with a market capitalisation of AU$118m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Vita Life Sciences Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Insiders both bought and sold Vita Life Sciences shares in the last year, but the good news is they spent AU$26k more buying than they netted selling. When you weigh that up, it is a mild positive, indicating increased alignment between shareholders and management. Zooming in, we can see that the biggest insider purchase was by Non-Executive Chairman Henry Townsing for AU$240k worth of shares, at about AU$1.75 per share.

The good news, alongside the insider buying, for Vita Life Sciences bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have AU$38m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 32% of the shares on issue for the business, an appreciable amount considering the market cap.

Does Vita Life Sciences Deserve A Spot On Your Watchlist?

One important encouraging feature of Vita Life Sciences is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We should say that we've discovered 2 warning signs for Vita Life Sciences that you should be aware of before investing here.

Keen growth investors love to see insider buying. Thankfully, Vita Life Sciences isn't the only one. You can see a a curated list of Australian companies which have exhibited consistent growth accompanied by recent insider buying.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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