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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Indra Sistemas (BME:IDR). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.
How Fast Is Indra Sistemas Growing?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Indra Sistemas has managed to grow EPS by 31% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Indra Sistemas's EBIT margins were flat over the last year, revenue grew by a solid 5.6% to €3.3b. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Indra Sistemas's forecast profits?
Are Indra Sistemas Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.
The good news is that Indra Sistemas insiders spent a whopping €1.0m on stock in just one year, and I didn't see any selling. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. It is also worth noting that it was Senior VP of Transport & Defence Business and Executive Director Ignacio Mataix Entero who made the biggest single purchase, worth €152k, paying €7.70 per share.
Is Indra Sistemas Worth Keeping An Eye On?
For growth investors like me, Indra Sistemas's raw rate of earnings growth is a beacon in the night. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. To put it succinctly; Indra Sistemas is a strong candidate for your watchlist. Now, you could try to make up your mind on Indra Sistemas by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that Indra Sistemas 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 firstname.lastname@example.org. 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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