We Ran A Stock Scan For Earnings Growth And Vmoto (ASX:VMT) Passed With Ease
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Vmoto (ASX:VMT). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
See our latest analysis for Vmoto
Vmoto's Improving Profits
Vmoto has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Vmoto's EPS has risen over the last 12 months, growing from AU$0.029 to AU$0.035. There's little doubt shareholders would be happy with that 22% gain.
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. The music to the ears of Vmoto shareholders is that EBIT margins have grown from 7.3% to 11% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Since Vmoto is no giant, with a market capitalisation of AU$99m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Vmoto 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.
The good news for Vmoto shareholders is that no insiders reported selling shares in the last year. Add in the fact that Shannon Coates, the Independent Non-Executive Director of the company, paid AU$23k for shares at around AU$0.38 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.
And the insider buying isn't the only sign of alignment between shareholders and the board, since Vmoto insiders own more than a third of the company. In fact, they own 82% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about AU$81m riding on the stock, at current prices. So there's plenty there to keep them focused!
Does Vmoto Deserve A Spot On Your Watchlist?
One important encouraging feature of Vmoto is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. Before you take the next step you should know about the 2 warning signs for Vmoto that we have uncovered.
Keen growth investors love to see insider buying. Thankfully, Vmoto 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.
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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