Here's Why We Think Nine Entertainment Holdings (ASX:NEC) Is Well Worth Watching

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Nine Entertainment Holdings (ASX:NEC). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Our analysis indicates that NEC is potentially undervalued!

How Fast Is Nine Entertainment Holdings Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Nine Entertainment Holdings managed to grow EPS by 5.0% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

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. The music to the ears of Nine Entertainment Holdings shareholders is that EBIT margins have grown from 17% to 20% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Nine Entertainment Holdings' future profits.

Are Nine Entertainment Holdings 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Nine Entertainment Holdings insiders refrain from selling stock during the year, but they also spent AU$126k buying it. This is a good look for the company as it paints an optimistic picture for the future.

Does Nine Entertainment Holdings Deserve A Spot On Your Watchlist?

As previously touched on, Nine Entertainment Holdings is a growing business, which is encouraging. It's not easy for business to grow EPS, but Nine Entertainment Holdings has shown the strengths to do just that. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. Still, you should learn about the 1 warning sign we've spotted with Nine Entertainment Holdings.

The good news is that Nine Entertainment Holdings 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.