Do Inspiration Healthcare Group's (LON:IHC) Earnings Warrant Your Attention?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like Inspiration Healthcare Group (LON:IHC). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Inspiration Healthcare Group

Inspiration Healthcare 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). It's no surprise, then, that I like to invest in companies with EPS growth. Inspiration Healthcare Group managed to grow EPS by 8.5% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). While we note Inspiration Healthcare Group's EBIT margins were flat over the last year, revenue grew by a solid 108% to UK£37m. That's a real positive.

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.

Since Inspiration Healthcare Group is no giant, with a market capitalization of UK£82m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Inspiration Healthcare Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We note that Inspiration Healthcare Group insiders spent UK£40k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. We also note that it was the CEO & Executive Director, Neil Campbell, who made the biggest single acquisition, paying UK£10.0k for shares at about UK£0.65 each.

The good news, alongside the insider buying, for Inspiration Healthcare Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold UK£19m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. That amounts to 23% of the company, demonstrating a degree of high-level alignment with shareholders.

Should You Add Inspiration Healthcare Group To Your Watchlist?

One positive for Inspiration Healthcare Group is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. We should say that we've discovered 2 warning signs for Inspiration Healthcare Group (1 is potentially serious!) that you should be aware of before investing here.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Inspiration Healthcare Group, 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. 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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