If EPS Growth Is Important To You, SILK Laser Australia (ASX:SLA) Presents An Opportunity

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 SILK Laser Australia (ASX:SLA). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for SILK Laser Australia

SILK Laser Australia's Improving Profits

Over the last three years, SILK Laser Australia has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. SILK Laser Australia's EPS skyrocketed from AU$0.092 to AU$0.14, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 48%.

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. While SILK Laser Australia did well to grow revenue over the last year, EBIT margins were dampened at the same time. So if EBIT margins can stabilize, this top-line growth should pay off for shareholders.

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.

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 SILK Laser Australia's future EPS 100% free.

Are SILK Laser Australia 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. Because often, 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.

One positive for SILK Laser Australia, is that company insiders spent AU$32k acquiring shares in the last year. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. We also note that it was the Director, Sinead Ryan, who made the biggest single acquisition, paying AU$22k for shares at about AU$2.70 each.

The good news, alongside the insider buying, for SILK Laser Australia bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have AU$20m worth of shares. That's a lot of money, and no small incentive to work hard. As a percentage, this totals to 12% of the shares on issue for the business, an appreciable amount considering the market cap.

Should You Add SILK Laser Australia To Your Watchlist?

You can't deny that SILK Laser Australia has grown its earnings per share at a very impressive rate. That's attractive. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. Of course, just because SILK Laser Australia is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

Keen growth investors love to see insider buying. Thankfully, SILK Laser Australia 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.

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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.