Here's Why We Think Vitura Health (ASX:VIT) Is Well Worth Watching

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Vitura Health (ASX:VIT), which has not only revenues, but also profits. 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.

See our latest analysis for Vitura Health

Vitura Health's Improving Profits

Over the last three years, Vitura Health 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. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, Vitura Health's EPS shot from AU$0.011 to AU$0.019, over the last year. Year on year growth of 72% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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 we note Vitura Health achieved similar EBIT margins to last year, revenue grew by a solid 133% to AU$97m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Vitura Health is no giant, with a market capitalisation of AU$267m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Vitura Health Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Vitura Health insiders own a meaningful share of the business. Indeed, with a collective holding of 52%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. With that sort of holding, insiders have about AU$138m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Is Vitura Health Worth Keeping An Eye On?

Vitura Health's earnings per share have been soaring, with growth rates sky high. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Vitura Health for a spot on your watchlist. It is worth noting though that we have found 1 warning sign for Vitura Health that you need to take into consideration.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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.