Here's Why We Think NTG Clarity Networks (CVE:NCI) Might Deserve Your Attention 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 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in NTG Clarity Networks (CVE:NCI). 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.

View our latest analysis for NTG Clarity Networks

How Fast Is NTG Clarity Networks Growing Its Earnings Per Share?

In the last three years NTG Clarity Networks' 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. As a result, we'll zoom in on growth over the last year, instead. NTG Clarity Networks' EPS shot up from CA$0.087 to CA$0.11; a result that's bound to keep shareholders happy. That's a fantastic gain of 30%.

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. EBIT margins for NTG Clarity Networks remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 76% to CA$39m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since NTG Clarity Networks is no giant, with a market capitalisation of CA$61m, you should definitely check its cash and debt before getting too excited about its prospects.

Are NTG Clarity Networks 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Despite CA$619k worth of sales, NTG Clarity Networks insiders have overwhelmingly been buying the stock, spending CA$1.3m on purchases in the last twelve months. This overall confidence in the company at current the valuation signals their optimism. Zooming in, we can see that the biggest insider purchase was by Founder Ashraf Zaghloul for CA$975k worth of shares, at about CA$0.15 per share.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for NTG Clarity Networks will reveal that insiders own a significant piece of the pie. Owning 43% of the company, insiders have plenty riding on the performance of the the share price. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. In terms of absolute value, insiders have CA$26m invested in the business, at the current share price. So there's plenty there to keep them focused!

Is NTG Clarity Networks Worth Keeping An Eye On?

For growth investors, NTG Clarity Networks' raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. It is worth noting though that we have found 6 warning signs for NTG Clarity Networks (2 make us uncomfortable!) that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of NTG Clarity Networks, you'll probably love this curated collection of companies in CA 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.