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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Sanderson Design Group (LON:SDG). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Fast Is Sanderson Design Group Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Sanderson Design Group has managed to grow EPS by 21% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Sanderson Design Group shareholders can take confidence from the fact that EBIT margins are up from 5.5% to 10%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Sanderson Design 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 Sanderson Design Group Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
We note that Sanderson Design Group insiders spent UK£79k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Director Christopher Rogers for UK£59k worth of shares, at about UK£1.67 per share.
Does Sanderson Design Group Deserve A Spot On Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Sanderson Design Group's strong EPS growth. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. So on this analysis I believe Sanderson Design Group is probably worth spending some time on. What about risks? Every company has them, and we've spotted 2 warning signs for Sanderson Design Group you should know about.
The good news is that Sanderson Design Group 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.