Here's Why We Think Peoplein (ASX:PPE) Might Deserve Your Attention Today

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Peoplein (ASX:PPE). 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 Peoplein

How Quickly Is Peoplein Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Peoplein has managed to grow EPS by 22% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. EBIT margins for Peoplein remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 72% to AU$963m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Peoplein's future EPS 100% free.

Are Peoplein 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, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling Peoplein shares, in the last year. With that in mind, it's heartening that Vu Tran, the Non-Executive Director of the company, paid AU$58k for shares at around AU$2.92 each. It seems that at least one insider is prepared to show the market there is potential within Peoplein.

Along with the insider buying, another encouraging sign for Peoplein is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at AU$20m. This considerable investment should help drive long-term value in the business. Those holdings account for over 7.8% of the company; visible skin in the game.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Ross Thompson is paid comparatively modestly to CEOs at similar sized companies. The median total compensation for CEOs of companies similar in size to Peoplein, with market caps between AU$149m and AU$597m, is around AU$988k.

The CEO of Peoplein only received AU$410k in total compensation for the year ending June 2022. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Does Peoplein Deserve A Spot On Your Watchlist?

For growth investors, Peoplein's raw rate of earnings growth is a beacon in the night. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. So it's fair to say that this stock may well deserve a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 3 warning signs for Peoplein that you need to be mindful of.

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