Should You Be Adding Tatton Asset Management (LON:TAM) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Tatton Asset Management (LON:TAM), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Tatton Asset Management

Tatton Asset Management's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. It certainly is nice to see that Tatton Asset Management has managed to grow EPS by 23% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. The good news is that Tatton Asset Management is growing revenues, and EBIT margins improved by 7.3 percentage points to 40%, over the last year. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

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

Are Tatton Asset Management Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

In the last year insider at Tatton Asset Management were both selling and buying shares; but happily, as a group they spent UK£139k more on stock, than they netted from selling it. On balance, that's a good sign. We also note that it was the CFO & Director, Paul Edwards, who made the biggest single acquisition, paying UK£71k for shares at about UK£4.30 each.

Along with the insider buying, another encouraging sign for Tatton Asset Management is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at UK£18m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 8.3% of the shares on issue for the business, an appreciable amount considering the market cap.

Is Tatton Asset Management Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Tatton Asset Management's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. So it's fair to say that this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Tatton Asset Management , and understanding them should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, Tatton Asset Management 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. 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.