Does 3i Group (LON:III) Deserve A Spot On Your Watchlist?

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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like 3i Group (LON:III). 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.

See our latest analysis for 3i Group

3i Group's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, 3i Group has achieved impressive annual EPS growth of 41%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. Not all of 3i Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. EBIT margins for 3i Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 26% to UK£3.7b. That's encouraging news for the company!

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for 3i Group's future EPS 100% free.

Are 3i Group 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.

Any way you look at it 3i Group shareholders can gain quiet confidence from the fact that insiders shelled out UK£265k to buy stock, over the last year. When you contrast that with the complete lack of sales, it's easy for shareholders to be brimming with joyful expectancy. It is also worth noting that it was company insider Stephen Daintith who made the biggest single purchase, worth UK£98k, paying UK£11.12 per share.

The good news, alongside the insider buying, for 3i Group bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth UK£229m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

Is 3i Group Worth Keeping An Eye On?

3i Group's earnings per share growth have been climbing higher at an appreciable rate. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe 3i Group deserves timely attention. You should always think about risks though. Case in point, we've spotted 3 warning signs for 3i Group you should be aware of, and 2 of them are potentially serious.

Keen growth investors love to see insider buying. Thankfully, 3i 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. 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.