With EPS Growth And More, Diploma (LON:DPLM) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Diploma (LON:DPLM). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Diploma with the means to add long-term value to shareholders.

Check out our latest analysis for Diploma

Diploma's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Diploma grew its EPS by 5.1% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The good news is that Diploma is growing revenues, and EBIT margins improved by 2.5 percentage points to 15%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Diploma's forecast profits?

Are Diploma Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Diploma top brass are certainly in sync, not having sold any shares, over the last year. But the real excitement comes from the UK£112k that CFO & Director Barbara Gibbes spent buying shares (at an average price of about UK£32.56). Strong buying like that could be a sign of opportunity.

Does Diploma Deserve A Spot On Your Watchlist?

One important encouraging feature of Diploma is that it is growing profits. While some companies are struggling to grow EPS, Diploma seems free from that morose affliction. The icing on the cake is that an insider bought shares during the year; a point of interest for people who will want to keep a watchful eye on this stock. It is worth noting though that we have found 2 warning signs for Diploma that you need to take into consideration.

The good news is that Diploma is not the only growth stock with insider buying. Here's a list of them... 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. 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.