Here's Why I Think Spark Power Group (TSE:SPG) Is An Interesting Stock

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Spark Power Group (TSE:SPG). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Spark Power Group

Spark Power Group's Improving Profits

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that Spark Power Group's EPS went from CA$0.0059 to CA$0.052 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. 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. Spark Power Group maintained stable EBIT margins over the last year, all while growing revenue 30% to CA$219m. That's progress.

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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Spark Power Group's future profits.

Are Spark Power Group Insiders Aligned With All Shareholders?

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

In the last twelve months Spark Power Group insiders spent CA$28k on stock; good news for shareholders. While this isn't much, we also note an absence of sales. Zooming in, we can see that the biggest insider purchase was by Cody Zaitsoff for CA$11k worth of shares, at about CA$1.10 per share.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Spark Power Group insiders own more than a third of the company. Indeed, with a collective holding of 54%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about CA$41m riding on the stock, at current prices. That's nothing to sneeze at!

Should You Add Spark Power Group To Your Watchlist?

Spark Power Group's earnings have taken off like any random crypto-currency did, back in 2017. Just as heartening; insiders both own and are buying more stock. Because of the potential that it has reached an inflection point, I'd suggest Spark Power Group belongs on the top of your watchlist. What about risks? Every company has them, and we've spotted 5 warning signs for Spark Power Group (of which 1 is a bit concerning!) you should know about.

As a growth investor I do like to see insider buying. But Spark Power 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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This article by Simply Wall St is general in nature. 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.
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