Here's Why We Think Pureprofile (ASX:PPL) Might Deserve Your Attention Today

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Pureprofile (ASX:PPL). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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Pureprofile's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. Which is why EPS growth is looked upon so favourably. It's an outstanding feat for Pureprofile to have grown EPS from AU$0.000093 to AU$0.0013 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Pureprofile maintained stable EBIT margins over the last year, all while growing revenue 19% to AU$57m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Check out our latest analysis for Pureprofile

Since Pureprofile is no giant, with a market capitalisation of AU$55m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Pureprofile Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

The AU$404k worth of shares that insiders sold during the last 12 months pales in comparison to the AU$7.0m they spent on acquiring shares in the company. This adds to the interest in Pureprofile because it suggests that those who understand the company best, are optimistic. We also note that it was the company insider, Danny Kontos, who made the biggest single acquisition, paying AU$2.6m for shares at about AU$0.049 each.

Does Pureprofile Deserve A Spot On Your Watchlist?

Pureprofile's earnings have taken off in quite an impressive fashion. Growth-minded people will be intrigued by the incredible movement in EPS growth. And may very well signal a significant inflection point for the business. If this these factors intrigue you, then an addition of Pureprofile to your watchlist won't go amiss. We don't want to rain on the parade too much, but we did also find 1 warning sign for Pureprofile that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Pureprofile, you'll probably love this curated collection of companies in AU that have an attractive valuation alongside 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.