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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like SoftwareONE Holding (VTX:SWON). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
SoftwareONE Holding's Earnings Per Share Are Growing.
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that SoftwareONE Holding has managed to grow EPS by 29% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
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. SoftwareONE Holding maintained stable EBIT margins over the last year, all while growing revenue 5.0% to CHF8.2b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Fortunately, we've got access to analyst forecasts of SoftwareONE Holding's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are SoftwareONE Holding Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a CHF4.6b company like SoftwareONE Holding. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth CHF202m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.
Should You Add SoftwareONE Holding To Your Watchlist?
For growth investors like me, SoftwareONE Holding's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Before you take the next step you should know about the 2 warning signs for SoftwareONE Holding (1 shouldn't be ignored!) that we have uncovered.
Although SoftwareONE Holding certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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.
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