Should You Be Adding IPH (ASX:IPH) To Your Watchlist Today?

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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like IPH (ASX:IPH), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for IPH

IPH's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. IPH's EPS has risen over the last 12 months, growing from AU$0.24 to AU$0.27. That's a 14% gain; respectable growth in the broader scheme of things.

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. EBIT margins for IPH remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 29% to AU$483m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for IPH.

Are IPH 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.

First and foremost; there we saw no insiders sell IPH shares in the last year. But the really good news is that Non-Executive Chairman Peter Warne spent AU$347k buying stock, at an average price of around AU$8.68. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.

Does IPH Deserve A Spot On Your Watchlist?

As previously touched on, IPH is a growing business, which is encouraging. Not every business can grow its EPS, but IPH certainly can. Despite there being a solitary insider adding to their holdings, it's enough to consider adding this to the watchlist. You still need to take note of risks, for example - IPH has 3 warning signs (and 1 which can't be ignored) we think you should know about.

The good news is that IPH 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. 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.