Does PPHE Hotel Group (LON:PPH) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like PPHE Hotel Group (LON:PPH), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

View our latest analysis for PPHE Hotel Group

How Fast Is PPHE Hotel Group Growing Its Earnings Per Share?

PPHE Hotel Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. In impressive fashion, PPHE Hotel Group's EPS grew from UK£0.24 to UK£0.53, over the previous 12 months. It's not often a company can achieve year-on-year growth of 123%. Shareholders will be hopeful that this is a sign of the company reaching an inflection point.

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 PPHE Hotel Group is growing revenues, and EBIT margins improved by 3.5 percentage points to 20%, over the last year. Both of which are great metrics to check off for potential growth.

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.

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 PPHE Hotel Group?

Are PPHE Hotel Group 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. 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.

The good news for PPHE Hotel Group is that one insider has illustrated their belief in the company's future with a huge purchase of shares in the last 12 months. Specifically, the President, Boris Ivesha, accumulated UK£53m worth of shares at a price of UK£11.40. It doesn't get much better than that, in terms of large investments from insiders.

The good news, alongside the insider buying, for PPHE Hotel Group bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth UK£90m. Coming in at 15% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. So there is opportunity here to invest in a company whose management have tangible incentives to deliver.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Boris Ivesha, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like PPHE Hotel Group with market caps between UK£309m and UK£1.2b is about UK£1.0m.

PPHE Hotel Group offered total compensation worth UK£750k to its CEO in the year to December 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Is PPHE Hotel Group Worth Keeping An Eye On?

PPHE Hotel Group's earnings have taken off in quite an impressive fashion. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe PPHE Hotel Group deserves timely attention. You still need to take note of risks, for example - PPHE Hotel Group has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

The good news is that PPHE Hotel Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in GB 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com