Do System1 Group's (LON:SYS1) Earnings Warrant Your Attention?

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. 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.

In contrast to all that, many investors prefer to focus on companies like System1 Group (LON:SYS1), which has not only revenues, but also profits. 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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How Fast Is System1 Group Growing Its Earnings Per Share?

In the last three years System1 Group's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. To the delight of shareholders, System1 Group's EPS soared from UK£0.25 to UK£0.39, over the last year. That's a impressive gain of 58%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Unfortunately, revenue is down and so are margins. This is less than stellar for the company.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

View our latest analysis for System1 Group

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for System1 Group.

Are System1 Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, 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.

Any way you look at it System1 Group shareholders can gain quiet confidence from the fact that insiders shelled out UK£484k 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. Zooming in, we can see that the biggest insider purchase was by Founder & Non-Executive Director John Kearon for UK£439k worth of shares, at about UK£4.32 per share.

Does System1 Group Deserve A Spot On Your Watchlist?

You can't deny that System1 Group has grown its earnings per share at a very impressive rate. That's attractive. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. To put it succinctly; System1 Group is a strong candidate for your watchlist. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for System1 Group (1 is concerning) you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of System1 Group, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside 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.