We Ran A Stock Scan For Earnings Growth And N1 Holdings (ASX:N1H) 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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.

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 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.

Check out our latest analysis for N1 Holdings

N1 Holdings' Improving Profits

Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that N1 Holdings grew its EPS from AU$0.0017 to AU$0.013, in one short year. Even though that growth rate may not be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that N1 Holdings is growing revenues, and EBIT margins improved by 30.7 percentage points to 55%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since N1 Holdings is no giant, with a market capitalisation of AU$15m, you should definitely check its cash and debt before getting too excited about its prospects.

Are N1 Holdings Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We note that N1 Holdings insiders spent AU$111k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. We also note that it was the CFO & Executive Director, Jia He, who made the biggest single acquisition, paying AU$54k for shares at about AU$0.22 each.

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. In fact, they own 78% 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. Valued at only AU$15m N1 Holdings is really small for a listed company. So this large proportion of shares owned by insiders only amounts to AU$11m. That might not be a huge sum but it should be enough to keep insiders motivated!

Does N1 Holdings Deserve A Spot On Your Watchlist?

N1 Holdings' earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are 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. Still, you should learn about the 3 warning signs we've spotted with N1 Holdings (including 1 which shouldn't be ignored).

There are plenty of other companies that have insiders buying up shares. So if you like the sound of N1 Holdings, 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.

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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.