For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and 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.
So if you're like me, you might be more interested in profitable, growing companies, like Assura (LON:AGR). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
Assura's Earnings Per Share Are Growing.
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That makes EPS growth an attractive quality for any company. Over the last three years, Assura has grown EPS by 4.0% per year. While that sort of growth rate isn't amazing, it does show the business is growing.
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. Assura maintained stable EBIT margins over the last year, all while growing revenue 8.3% to UK£121m. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Assura's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Assura 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. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Not only did Assura insiders refrain from selling stock during the year, but they also spent UK£112k buying it. That's nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by CFO, Member of Executive Board & Executive Director Jayne Marie Cottam for UK£62k worth of shares, at about UK£0.80 per share.
Does Assura Deserve A Spot On Your Watchlist?
One important encouraging feature of Assura is that it is growing profits. Not every business can grow its EPS, but Assura certainly can. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. It is worth noting though that we have found 3 warning signs for Assura (1 makes us a bit uncomfortable!) that you need to take into consideration.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Assura, 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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This article by Simply Wall St is general in nature. 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.
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