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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in OraSure Technologies (NASDAQ:OSUR). 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 Quickly Is OraSure Technologies Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, OraSure Technologies has grown EPS by 19% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
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). I note that, last year, OraSure Technologies's revenue from operations was lower than its revenue, so that could distort my analysis of its margins. While OraSure Technologies may have maintained EBIT margins over the last year, revenue has fallen. Suffice it to say that is not a great sign of growth.
The chart below shows how the company's bottom and top lines have progressed over time. 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 OraSure Technologies?
Are OraSure Technologies Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.
OraSure Technologies insiders both bought and sold shares over the last twelve months, but they did end up spending US$7.8k more on stock than they received from selling it. So, on balance, the insider transactions are mildly encouraging. It is also worth noting that it was CFO & Principal Accounting Officer Roberto Cuca who made the biggest single purchase, worth US$90k, paying US$9.04 per share.
The good news, alongside the insider buying, for OraSure Technologies bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$14m worth of shares. That's a lot of money, and no small incentive to work hard. Even though that's only about 2.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Does OraSure Technologies Deserve A Spot On Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about OraSure Technologies's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of OraSure Technologies.
As a growth investor I do like to see insider buying. But OraSure Technologies 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
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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. Thank you for reading.