Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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 Integral Diagnostics (ASX:IDX), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Quickly Is Integral Diagnostics Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Integral Diagnostics managed to grow EPS by 4.0% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Integral Diagnostics maintained stable EBIT margins over the last year, all while growing revenue 18% to AU$250m. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Integral Diagnostics.
Are Integral Diagnostics Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.
In the last year insider at Integral Diagnostics were both selling and buying shares; but happily, as a group they spent AU$244k more on stock, than they netted from selling it. Although I don't particularly like to see selling, the fact that they put more capital in, than they extracted, is a positive in my mind. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Chairman Helen Kurincic for AU$193k worth of shares, at about AU$2.71 per share.
The good news, alongside the insider buying, for Integral Diagnostics bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have AU$44m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 6.0% of the company; visible skin in the game.
Is Integral Diagnostics Worth Keeping An Eye On?
One positive for Integral Diagnostics is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. You still need to take note of risks, for example - Integral Diagnostics has 3 warning signs we think you should be aware of.
As a growth investor I do like to see insider buying. But Integral Diagnostics isn't the only one. You can see a a free list of them here.
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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