With EPS Growth And More, Stealth Global Holdings (ASX:SGI) Is Interesting

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Stealth Global Holdings (ASX:SGI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Stealth Global Holdings

Stealth Global Holdings's Improving Profits

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that Stealth Global Holdings grew its EPS from AU$0.001 to AU$0.0056, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. The good news is that Stealth Global Holdings is growing revenues, and EBIT margins improved by 3.2 percentage points to 3.7%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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

Are Stealth Global Holdings Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.

Any way you look at it Stealth Global Holdings shareholders can gain quiet confidence from the fact that insiders shelled out AU$879k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to brim with joyful expectancy. We also note that it was the , Narelle Edmunds, who made the biggest single acquisition, paying AU$239k for shares at about AU$0.17 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Stealth Global Holdings insiders own more than a third of the company. Actually, with 42% 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. Of course, Stealth Global Holdings is a very small company, with a market cap of only AU$15m. That means insiders only have AU$6.2m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Does Stealth Global Holdings Deserve A Spot On Your Watchlist?

Stealth Global Holdings's earnings per share have taken off like a rocket aimed right at the moon. What's more insiders own a significant stake in the company and have been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Stealth Global Holdings belongs on the top of your watchlist. Even so, be aware that Stealth Global Holdings is showing 5 warning signs in our investment analysis , you should know about...

As a growth investor I do like to see insider buying. But Stealth Global Holdings 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.

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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