Does SigmaRoc (LON:SRC) 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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 SigmaRoc (LON:SRC). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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SigmaRoc's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that SigmaRoc has managed to grow EPS by 24% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. While we note SigmaRoc achieved similar EBIT margins to last year, revenue grew by a solid 78% to UK£963m. That's encouraging news for the company!

In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.

See our latest analysis for SigmaRoc

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 SigmaRoc's future profits.

Are SigmaRoc 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

With strong conviction, SigmaRoc insiders have stood united by refusing to sell shares over the last year. But more importantly, Executive Chairman David Barrett spent UK£60k acquiring shares, doing so at an average price of UK£0.71. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

Recent insider purchases of SigmaRoc stock is not the only way management has kept the interests of the general public shareholders in mind. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalisations between UK£744m and UK£2.4b, like SigmaRoc, the median CEO pay is around UK£1.9m.

The SigmaRoc CEO received UK£1.3m in compensation for the year ending December 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Does SigmaRoc Deserve A Spot On Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into SigmaRoc's strong EPS growth. To add to the positives, SigmaRoc has recorded instances of insider buying and a modest executive pay to boot. All in all, this stock is worth the time to delve deeper into the details. Before you take the next step you should know about the 2 warning signs for SigmaRoc (1 doesn't sit too well with us!) that we have uncovered.

Keen growth investors love to see insider activity. Thankfully, SigmaRoc isn't the only one. You can see a a curated list of British companies which have exhibited consistent growth accompanied by high insider ownership.

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.