We Ran A Stock Scan For Earnings Growth And discoverIE Group (LON:DSCV) Passed With Ease
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
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 discoverIE Group (LON:DSCV). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for discoverIE Group
discoverIE Group's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. discoverIE Group managed to grow EPS by 9.1% per year, over three years. That's a good rate of growth, if it can be sustained.
Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note discoverIE Group achieved similar EBIT margins to last year, revenue grew by a solid 18% to UK£449m. That's encouraging news for the company!
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of discoverIE Group's forecast profits?
Are discoverIE Group Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, 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.
We note that discoverIE Group insiders spent UK£157k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Group Chief Executive & Executive Director Nicholas Jefferies who made the biggest single purchase, worth UK£75k, paying UK£6.25 per share.
The good news, alongside the insider buying, for discoverIE Group bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at UK£16m. This considerable investment should help drive long-term value in the business. Despite being just 1.8% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
Should You Add discoverIE Group To Your Watchlist?
One positive for discoverIE Group is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Now, you could try to make up your mind on discoverIE Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of discoverIE Group, 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.
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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