Does Liontrust Asset Management (LON:LIO) Deserve A Spot On Your Watchlist?

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Liontrust Asset Management (LON:LIO). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Liontrust Asset Management

How Fast Is Liontrust Asset Management Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that Liontrust Asset Management has managed to grow EPS by 35% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Liontrust Asset Management is growing revenues, and EBIT margins improved by 8.1 percentage points to 33%, 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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Liontrust Asset Management's future profits.

Are Liontrust 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Liontrust Asset Management insiders both bought and sold shares over the last twelve months, but they did end up spending UK£29k more on stock than they received from selling it. At face value we can consider this a fairly encouraging sign for the company. It is also worth noting that it was CEO & Executive Director John Ions who made the biggest single purchase, worth UK£1.1m, paying UK£8.43 per share.

Along with the insider buying, another encouraging sign for Liontrust Asset Management is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at UK£15m. That's a lot of money, and no small incentive to work hard. Despite being just 2.9% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Liontrust Asset Management Worth Keeping An Eye On?

For growth investors, Liontrust Asset Management's raw rate of earnings growth is a beacon in the night. 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. We don't want to rain on the parade too much, but we did also find 2 warning signs for Liontrust Asset Management that you need to be mindful of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Liontrust Asset Management, you'll probably love this free list of growing companies that insiders are buying.

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.