Here's Why Paragon Banking Group (LON:PAG) Has Caught The Eye Of Investors

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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.

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 Paragon Banking Group (LON:PAG). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Paragon Banking Group

How Quickly Is Paragon Banking Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Recognition must be given to the that Paragon Banking Group has grown EPS by 42% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

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 Paragon Banking Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note Paragon Banking Group achieved similar EBIT margins to last year, revenue grew by a solid 15% to UK£400m. That's progress.

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 Paragon Banking Group's future EPS 100% free.

Are Paragon Banking Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Any way you look at it Paragon Banking Group shareholders can gain quiet confidence from the fact that insiders shelled out UK£205k 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 Independent Non-Executive Chairman Robert East who made the biggest single purchase, worth UK£49k, paying UK£4.90 per share.

Is Paragon Banking Group Worth Keeping An Eye On?

Paragon Banking Group's earnings have taken off in quite an impressive fashion. Growth-minded people will be intrigued by the incredible movement in EPS growth. And in fact, it could well signal a fundamental shift in the business economics. If this these factors intrigue you, then an addition of Paragon Banking Group to your watchlist won't go amiss. Before you take the next step you should know about the 3 warning signs for Paragon Banking Group (1 is concerning!) that we have uncovered.

The good news is that Paragon Banking Group is not the only growth stock with insider buying. Here's a list of them... 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.