Should You Be Adding Vertex Resource Group (CVE:VTX) To Your Watchlist Today?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Vertex Resource Group (CVE:VTX). 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.

See our latest analysis for Vertex Resource Group

How Fast Is Vertex Resource Group Growing Its Earnings Per Share?

In the last three years Vertex Resource Group's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Over the last year, Vertex Resource Group increased its EPS from CA$0.031 to CA$0.033. That's a fair increase of 7.5%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. While we note Vertex Resource Group achieved similar EBIT margins to last year, revenue grew by a solid 27% to CA$238m. That's a real positive.

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.

Vertex Resource Group isn't a huge company, given its market capitalisation of CA$52m. That makes it extra important to check on its balance sheet strength.

Are Vertex Resource Group 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Shareholders in Vertex Resource Group will be more than happy to see insiders committing themselves to the company, spending CA$514k on shares in just twelve months. And when you consider that there was no insider selling, you can understand why shareholders might believe that there are brighter days ahead. It is also worth noting that it was President Terry Stephenson who made the biggest single purchase, worth CA$221k, paying CA$0.34 per share.

On top of the insider buying, we can also see that Vertex Resource Group insiders own a large chunk of the company. Owning 37% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only CA$52m Vertex Resource Group is really small for a listed company. So despite a large proportional holding, insiders only have CA$20m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Does Vertex Resource Group Deserve A Spot On Your Watchlist?

As previously touched on, Vertex Resource Group is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. What about risks? Every company has them, and we've spotted 3 warning signs for Vertex Resource Group (of which 1 is a bit unpleasant!) you should know about.

Keen growth investors love to see insider buying. Thankfully, Vertex Resource 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.