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 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 Sigma Capital Group (LON:SGM). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Sigma Capital Group Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Who among us would not applaud Sigma Capital Group’s stratospheric annual EPS growth of 55%, compound, over the last three years? While that sort of growth rate isn’t sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company’s growth. The good news is that Sigma Capital Group is growing revenues, and EBIT margins improved by 52.1 percentage points to 54%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
Since Sigma Capital Group is no giant, with a market capitalization of UK£91m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Sigma Capital Group Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.
Not only did Sigma Capital Group insiders refrain from selling stock during the year, but they also spent UK£161k buying it. That’s nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Non-Executive Chairman David Sigsworth who made the biggest single purchase, worth UK£50k, paying UK£1.11 per share.
Is Sigma Capital Group Worth Keeping An Eye On?
Sigma Capital Group’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. If that’s the case, you may regret neglecting to put Sigma Capital Group on your watchlist. Now, you could try to make up your mind on Sigma Capital Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
As a growth investor I do like to see insider buying. But Sigma Capital 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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