Should You Be Adding LleidaNetworks Serveis Telemàtics (BME:LLN) To Your Watchlist Today?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in LleidaNetworks Serveis Telemàtics (BME:LLN). 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for LleidaNetworks Serveis Telemàtics

LleidaNetworks Serveis Telemàtics's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. It is therefore awe-striking that LleidaNetworks Serveis Telemàtics's EPS went from €0.018 to €0.071 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.

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. LleidaNetworks Serveis Telemàtics shareholders can take confidence from the fact that EBIT margins are up from 4.0% to 7.7%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

LleidaNetworks Serveis Telemàtics isn't a huge company, given its market capitalization of €83m. That makes it extra important to check on its balance sheet strength.

Are LleidaNetworks Serveis Telemàtics Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that LleidaNetworks Serveis Telemàtics insiders own a significant number of shares certainly appeals to me. In fact, they own 43% of the shares, making insiders a very influential shareholder group. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. With that sort of holding, insiders have about €35m riding on the stock, at current prices. That's nothing to sneeze at!

Should You Add LleidaNetworks Serveis Telemàtics To Your Watchlist?

LleidaNetworks Serveis Telemàtics's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind LleidaNetworks Serveis Telemàtics is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. What about risks? Every company has them, and we've spotted 3 warning signs for LleidaNetworks Serveis Telemàtics you should know about.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with 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. 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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