Here's Why We Think Sureserve Group (LON:SUR) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without 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.

In contrast to all that, I prefer to spend time on companies like Sureserve Group (LON:SUR), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Sureserve Group

How Fast Is Sureserve Group Growing Its Earnings Per Share?

In the last three years Sureserve Group'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. Like the last firework on New Year's Eve accelerating into the sky, Sureserve Group's EPS shot from UK£0.015 to UK£0.034, over the last year. Year on year growth of 121% is certainly a sight to behold.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Sureserve Group maintained stable EBIT margins over the last year, all while growing revenue 8.4% to UK£219m. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Fortunately, we've got access to analyst forecasts of Sureserve Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Sureserve Group Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling Sureserve Group shares, in the last year. So it's definitely nice that Chief Executive & Executive Chairman Robert Holt bought UK£23k worth of shares at an average price of around UK£0.51.

The good news, alongside the insider buying, for Sureserve Group bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have UK£9.2m worth of shares. That's a lot of money, and no small incentive to work hard. That amounts to 10% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Sureserve Group To Your Watchlist?

Sureserve Group's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Sureserve Group deserves timely attention. Of course, just because Sureserve Group is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

As a growth investor I do like to see insider buying. But Sureserve Group isn't the only one. You can see a a free list of them here.

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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