Does London Stock Exchange Group (LON:LSEG) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like London Stock Exchange Group (LON:LSEG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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London Stock Exchange Group'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. That makes EPS growth an attractive quality for any company. London Stock Exchange Group managed to grow EPS by 7.2% per year, over three years. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Our analysis has highlighted that London Stock Exchange Group's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. London Stock Exchange Group shareholders can take confidence from the fact that EBIT margins are up from 20% to 23%, and revenue is growing. Ticking those two boxes is a good sign of growth, in our book.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

View our latest analysis for London Stock Exchange Group

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 London Stock Exchange Group's future profits.

Are London Stock Exchange 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. 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.

The good news is that London Stock Exchange Group insiders spent a whopping UK£1.1m on stock in just one year, without so much as a single sale. Knowing this, London Stock Exchange Group will have have all eyes on them in anticipation for the what could happen in the near future. We also note that it was the CFO & Director, Michel-Alain Proch, who made the biggest single acquisition, paying UK£532k for shares at about UK£93.50 each.

On top of the insider buying, it's good to see that London Stock Exchange Group insiders have a valuable investment in the business. 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. While their ownership only accounts for 0.03%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Does London Stock Exchange Group Deserve A Spot On Your Watchlist?

One important encouraging feature of London Stock Exchange Group is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. Of course, just because London Stock Exchange Group is growing does not mean it is undervalued. If you're wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.

The good news is that London Stock Exchange 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.

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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.