Here's Why We Think N1 Holdings (ASX:N1H) Might Deserve Your Attention Today

September 04, 2022
  •  Updated
October 31, 2022
Source: Shutterstock

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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 N1 Holdings (ASX:N1H). 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 N1 Holdings

How Fast Is N1 Holdings Growing Its Earnings Per Share?

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for N1 Holdings to have grown EPS from AU$0.0017 to AU$0.013 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

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. N1 Holdings shareholders can take confidence from the fact that EBIT margins are up from 24% to 55%, and revenue is growing. Both of which are great metrics to check off for potential 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.

ASX:N1H Earnings and Revenue History September 4th 2022

Since N1 Holdings is no giant, with a market capitalisation of AU$19m, you should definitely check its cash and debt before getting too excited about its prospects.

Are N1 Holdings 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did N1 Holdings insiders refrain from selling stock during the year, but they also spent AU$121k buying it. This is a good look for the company as it paints an optimistic picture for the future. Zooming in, we can see that the biggest insider purchase was by CFO & Executive Director Jia He for AU$54k worth of shares, at about AU$0.22 per share.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for N1 Holdings will reveal that insiders own a significant piece of the pie. To be exact, company insiders hold 72% of the company, so their decisions have a significant impact on their investments. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Of course, N1 Holdings is a very small company, with a market cap of only AU$19m. So this large proportion of shares owned by insiders only amounts to AU$14m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Should You Add N1 Holdings To Your Watchlist?

N1 Holdings' earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest N1 Holdings belongs near the top of your watchlist. We should say that we've discovered 3 warning signs for N1 Holdings (1 shouldn't be ignored!) that you should be aware of before investing here.

The good news is that N1 Holdings 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.

Valuation is complex, but we're helping make it simple.

Find out whether N1 Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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