Here's Why We Think IBU-tec advanced materials (ETR:IBU) Is Well Worth Watching

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in IBU-tec advanced materials (ETR:IBU). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for IBU-tec advanced materials

IBU-tec advanced materials's Improving Profits

In the last three years IBU-tec advanced materials's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. It's good to see that IBU-tec advanced materials's EPS have grown from €0.22 to €0.25 over twelve months. That's a 15% gain; respectable growth in the broader scheme of things.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. IBU-tec advanced materials's EBIT margins have actually improved by 6.1 percentage points in the last year, to reach 10%, but, on the flip side, revenue was down 32%. That's not ideal.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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 IBU-tec advanced materials's future profits.

Are IBU-tec advanced materials Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own IBU-tec advanced materials shares worth a considerable sum. Given insiders own a small fortune of shares, currently valued at €63m, they have plenty of motivation to push the business to succeed. At 33% of the company, the co-investment by insiders gives me confidence that management will make long-term focussed decisions.

Should You Add IBU-tec advanced materials To Your Watchlist?

As I already mentioned, IBU-tec advanced materials is a growing business, which is what I like to see. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. We don't want to rain on the parade too much, but we did also find 3 warning signs for IBU-tec advanced materials that you need to be mindful of.

Although IBU-tec advanced materials 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. 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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