Is Now The Time To Put Corum Group (ASX:COO) On Your Watchlist?

By
Simply Wall St
Published
November 12, 2021
ASX:COO
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Corum Group (ASX:COO). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

Check out our latest analysis for Corum Group

How Fast Is Corum Group Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Corum Group has managed to grow EPS by 25% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Corum Group shareholders can take confidence from the fact that EBIT margins are up from 4.8% to 9.2%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history
ASX:COO Earnings and Revenue History November 12th 2021

Corum Group isn't a huge company, given its market capitalization of AU$41m. That makes it extra important to check on its balance sheet strength.

Are Corum Group Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.

Not only did Corum Group insiders refrain from selling stock during the year, but they also spent AU$84k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. Zooming in, we can see that the biggest insider purchase was by Non-Executive Director Andrew Jonathan Newbery for AU$37k worth of shares, at about AU$0.098 per share.

Should You Add Corum Group To Your Watchlist?

For growth investors like me, Corum Group's raw rate of earnings growth is a beacon in the night. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. So on this analysis I believe Corum Group is probably worth spending some time on. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Corum Group , and understanding these should be part of your investment process.

As a growth investor I do like to see insider buying. But Corum Group 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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