Should You Be Adding Team17 Group (LON:TM17) To Your Watchlist Today?

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Team17 Group (LON:TM17). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Team17 Group

How Fast Is Team17 Group Growing Its Earnings Per Share?

Over the last three years, Team17 Group has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. As a result, I'll zoom in on growth over the last year, instead. Team17 Group has grown its trailing twelve month EPS from UK£0.15 to UK£0.16, in the last year. That's a modest gain of 6.3%.

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. Team17 Group maintained stable EBIT margins over the last year, all while growing revenue 20% to UK£84m. That's progress.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Team17 Group EPS 100% free.

Are Team17 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

It's a pleasure to note that insiders spent UK£1.3m buying Team17 Group shares, over the last year, without reporting any share sales whatsoever. As if for a flower bud approaching bloom, I become an expectant observer, anticipating with hope, that something splendid is coming. We also note that it was the CEO & Executive Director, Deborah Bestwick, who made the biggest single acquisition, paying UK£1m for shares at about UK£7.14 each.

The good news, alongside the insider buying, for Team17 Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at UK£199m. That equates to 21% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

Should You Add Team17 Group To Your Watchlist?

As I already mentioned, Team17 Group is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for my watchlist - and arguably a research priority. Even so, be aware that Team17 Group is showing 1 warning sign in our investment analysis , you should know about...

As a growth investor I do like to see insider buying. But Team17 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. 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.