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 Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like IXICO (LON:IXI). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
How Fast Is IXICO Growing Its Earnings Per Share?
Over the last three years, IXICO 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. Like the last firework on New Year's Eve accelerating into the sky, IXICO's EPS shot from UK£0.0093 to UK£0.02, over the last year. Year on year growth of 119% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.
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 IXICO is growing revenues, and EBIT margins improved by 4.2 percentage points to 9.0%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
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 IXICO is no giant, with a market capitalization of UK£37m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are IXICO 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We haven't seen any insiders selling IXICO shares, in the last year. So it's definitely nice that Senior Independent Director Mark Warne bought UK£8.9k worth of shares at an average price of around UK£0.63.
Is IXICO Worth Keeping An Eye On?
IXICO's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. If you're like me, you'll find it hard to ignore that sort of explosive EPS growth. And indeed, it could be a sign that the business is at an inflection point. For me, this situation certainly piques my interest. You still need to take note of risks, for example - IXICO has 2 warning signs we think you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of IXICO, 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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