I Ran A Stock Scan For Earnings Growth And Vmoto (ASX:VMT) Passed With Ease

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Vmoto (ASX:VMT). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Vmoto

How Fast Is Vmoto Growing Its Earnings Per Share?

Over the last three years, Vmoto has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, Vmoto's EPS shot from AU$0.0062 to AU$0.015, over the last year. You don't see 141% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

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). Vmoto shareholders can take confidence from the fact that EBIT margins are up from 0.6% to 4.3%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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.

Since Vmoto is no giant, with a market capitalization of AU$95m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Vmoto Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news for Vmoto shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Blair Sergeant, the Non-Executive Director of the company, paid AU$33k for shares at around AU$0.37 each.

On top of the insider buying, we can also see that Vmoto insiders own a large chunk of the company. Actually, with 38% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about AU$36m riding on the stock, at current prices. That's nothing to sneeze at!

Is Vmoto Worth Keeping An Eye On?

Vmoto's earnings have taken off like any random crypto-currency did, back in 2017. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Vmoto belongs on the top of your watchlist. Before you take the next step you should know about the 3 warning signs for Vmoto that we have uncovered.

The good news is that Vmoto 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.

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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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