Here's Why Cosmos Insurance Company (CSE:COS) Has Caught The Eye Of Investors

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Cosmos Insurance Company (CSE:COS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Cosmos Insurance Company with the means to add long-term value to shareholders.

View our latest analysis for Cosmos Insurance Company

Cosmos Insurance Company's Improving Profits

Cosmos Insurance Company 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. Thus, it makes sense to focus on more recent growth rates, instead. Cosmos Insurance Company's EPS skyrocketed from €0.021 to €0.035, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 65%.

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. Our analysis has highlighted that Cosmos Insurance Company's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Cosmos Insurance Company shareholders can take confidence from the fact that EBIT margins are up from 7.7% to 11%, and revenue is growing. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since Cosmos Insurance Company is no giant, with a market capitalisation of €7.2m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Cosmos Insurance Company Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So those who are interested in Cosmos Insurance Company will be delighted to know that insiders have shown their belief, holding a large proportion of the company's shares. Actually, with 38% of the company to their names, insiders are profoundly invested in the business. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, Cosmos Insurance Company is a very small company, with a market cap of only €7.2m. So this large proportion of shares owned by insiders only amounts to €2.8m. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Cosmos Insurance Company To Your Watchlist?

You can't deny that Cosmos Insurance Company has grown its earnings per share at a very impressive rate. That's attractive. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. Even so, be aware that Cosmos Insurance Company is showing 2 warning signs in our investment analysis , you should know about...

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in CY with promising growth potential and insider confidence.

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.

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