Here's Why Acumentis Group (ASX:ACU) Has Caught The Eye Of Investors

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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Acumentis Group (ASX:ACU). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Acumentis Group

Acumentis Group's Improving Profits

Acumentis Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, Acumentis Group's EPS catapulted from AU$0.0023 to AU$0.0064, over the last year. Year on year growth of 184% is certainly a sight to behold.

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. EBIT margins for Acumentis Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.5% to AU$57m. That's a real positive.

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.

Acumentis Group isn't a huge company, given its market capitalisation of AU$19m. That makes it extra important to check on its balance sheet strength.

Are Acumentis Group 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Acumentis Group insiders refrain from selling stock during the year, but they also spent AU$217k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. We also note that it was the company insider, Noel Kagi, who made the biggest single acquisition, paying AU$203k for shares at about AU$0.073 each.

Is Acumentis Group Worth Keeping An Eye On?

Acumentis Group's earnings per share growth have been climbing higher at an appreciable rate. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And may very well signal a significant inflection point for the business. If that's the case, you may regret neglecting to put Acumentis Group on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Acumentis Group , and understanding this should be part of your investment process.

The good news is that Acumentis Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in AU 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.