Do EMIS Group's (LON:EMIS) Earnings Warrant Your Attention?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like EMIS Group (LON:EMIS), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for EMIS Group

How Quickly Is EMIS Group Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, EMIS Group has grown EPS by 14% per year. That growth rate is fairly good, assuming the company can keep it up.

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. This approach makes EMIS Group look pretty good, on balance; although revenue is flattish, EBIT margins improved from 18% to 22% in the last year. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

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 EMIS Group's future profits.

Are EMIS Group Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

Not only did EMIS Group insiders refrain from selling stock during the year, but they also spent UK£90k buying it. That's nice to see, because it suggests insiders are optimistic. We also note that it was the CEO & Executive Director, Andrew Thorburn, who made the biggest single acquisition, paying UK£77k for shares at about UK£7.89 each.

Is EMIS Group Worth Keeping An Eye On?

As I already mentioned, EMIS Group is a growing business, which is what I like to see. Not every business can grow its EPS, but EMIS Group certainly can. The gravy on the mushroom pie is the insider buying, which has me tasting potential opportunity; one for the watchlist, I'd posit. Now, you could try to make up your mind on EMIS Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

As a growth investor I do like to see insider buying. But EMIS 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. 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.
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