Here's Why We Think Time Finance (LON:TIME) Is Well Worth Watching

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Time Finance (LON:TIME). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Time Finance with the means to add long-term value to shareholders.

View our latest analysis for Time Finance

How Quickly Is Time Finance Increasing Earnings Per Share?

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. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Time Finance has managed to grow EPS by 32% per year over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. It's noted that Time Finance's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. Time Finance maintained stable EBIT margins over the last year, all while growing revenue 23% to UK£33m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

Since Time Finance is no giant, with a market capitalisation of UK£55m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Time Finance 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

A great takeaway for shareholders is that company insiders within Time Finance have collectively spent UK£23k acquiring shares in the company. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. Zooming in, we can see that the biggest insider purchase was by Chief Financial Officer James Matthew Roberts for UK£10.0k worth of shares, at about UK£0.60 per share.

Is Time Finance Worth Keeping An Eye On?

For growth investors, Time Finance's raw rate of earnings growth is a beacon in the night. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. In essence, your time will not be wasted checking out Time Finance in more detail. What about risks? Every company has them, and we've spotted 1 warning sign for Time Finance you should know about.

Keen growth investors love to see insider activity. Thankfully, Time Finance isn't the only one. You can see a a curated list of British companies which have exhibited consistent growth accompanied by high insider ownership.

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.