Do IGO's (ASX:IGO) Earnings Warrant Your Attention?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 IGO (ASX:IGO). 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.

Check out our latest analysis for IGO

How Quickly Is IGO Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that IGO has grown EPS by 55% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. While IGO did well to grow revenue over the last year, EBIT margins were dampened at the same time. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of IGO's forecast profits?

Are IGO Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

In the last year insider at IGO were both selling and buying shares; but happily, as a group they spent AU$227k more on stock, than they netted from selling it. Shareholders who may have questioned insiders selling will find some reassurance in this fact. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Director Xiaoping Yang for AU$170k worth of shares, at about AU$17.01 per share.

On top of the insider buying, it's good to see that IGO insiders have a valuable investment in the business. As a matter of fact, their holding is valued at AU$47m. This considerable investment should help drive long-term value in the business. Even though that's only about 0.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Matt Dusci is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalisations between AU$5.8b and AU$17b, like IGO, the median CEO pay is around AU$3.7m.

The CEO of IGO only received AU$1.6m in total compensation for the year ending June 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.

Is IGO Worth Keeping An Eye On?

IGO's earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest IGO belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for IGO you should be aware of.

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