I Ran A Stock Scan For Earnings Growth And Inspiration Healthcare Group (LON:IHC) Passed With Ease

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 profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Inspiration Healthcare Group

How Fast Is Inspiration Healthcare Group Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Inspiration Healthcare Group managed to grow EPS by 17% 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). The good news is that Inspiration Healthcare Group is growing revenues, and EBIT margins improved by 4.2 percentage points to 13%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Since Inspiration Healthcare Group is no giant, with a market capitalization of UK£67m, 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?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Inspiration Healthcare Group insiders have a significant amount of capital invested in the stock. Indeed, they hold UK£13m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 20% of the company; visible skin in the game.

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. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Even so, be aware that Inspiration Healthcare Group is showing 1 warning sign in our investment analysis , you should know about...

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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. 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.