Should You Be Adding Integral Diagnostics (ASX:IDX) To Your Watchlist Today?

By
Simply Wall St
Published
May 13, 2021
ASX:IDX
Source: Shutterstock

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Integral Diagnostics (ASX:IDX). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Integral Diagnostics

Integral Diagnostics's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Integral Diagnostics managed to grow EPS by 16% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Integral Diagnostics maintained stable EBIT margins over the last year, all while growing revenue 26% to AU$315m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
ASX:IDX Earnings and Revenue History May 14th 2021

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 Integral Diagnostics.

Are Integral Diagnostics Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Integral Diagnostics insiders have a significant amount of capital invested in the stock. Indeed, they hold AU$42m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 4.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Integral Diagnostics Deserve A Spot On Your Watchlist?

One important encouraging feature of Integral Diagnostics is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We don't want to rain on the parade too much, but we did also find 2 warning signs for Integral Diagnostics that you need to be mindful of.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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