Here's Why We Think NexgenRx (CVE:NXG) 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 NexgenRx (CVE:NXG). 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 NexgenRx

How Fast Is NexgenRx Growing Its Earnings Per Share?

NexgenRx 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. So it would be better to isolate the growth rate over the last year for our analysis. NexgenRx's EPS skyrocketed from CA$0.028 to CA$0.043, in just one year; a result that's bound to bring a smile to shareholders. That's a commendable gain of 57%.

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. While we note NexgenRx achieved similar EBIT margins to last year, revenue grew by a solid 16% to CA$13m. 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.

Since NexgenRx is no giant, with a market capitalisation of CA$20m, you should definitely check its cash and debt before getting too excited about its prospects.

Are NexgenRx 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 NexgenRx insiders own a meaningful share of the business. In fact, they own 37% of the shares, making insiders a very influential shareholder group. Those who are comforted by solid insider ownership like this should be happy, as it implies that those running the business are genuinely motivated to create shareholder value. Although, with NexgenRx being valued at CA$20m, this is a small company we're talking about. So this large proportion of shares owned by insiders only amounts to CA$7.3m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Is NexgenRx Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into NexgenRx's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Even so, be aware that NexgenRx is showing 3 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

Although NexgenRx certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

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.