Is Now The Time To Put IMI (LON:IMI) On Your Watchlist?

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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like IMI (LON:IMI). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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IMI's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, IMI has grown EPS by 11% per year. That's a good rate of growth, if it can be sustained.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. It seems IMI is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.

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

Check out our latest analysis for IMI

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for IMI?

Are IMI Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We haven't seen any insiders selling IMI shares, in the last year. So it's definitely nice that Independent Non-Executive Director Jacqueline Callaway bought UK£36k worth of shares at an average price of around UK£18.71. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

On top of the insider buying, it's good to see that IMI insiders have a valuable investment in the business. As a matter of fact, their holding is valued at UK£15m. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.3% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add IMI To Your Watchlist?

One important encouraging feature of IMI is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We should say that we've discovered 1 warning sign for IMI that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of IMI, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside 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.