Here's Why We Think 1Spatial (LON:SPA) Is Well Worth Watching

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 currently 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. 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 1Spatial (LON:SPA), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide 1Spatial with the means to add long-term value to shareholders.

See our latest analysis for 1Spatial

1Spatial's Improving Profits

Over the last three years, 1Spatial has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. 1Spatial's EPS has risen over the last 12 months, growing from UK£0.0095 to UK£0.011. That's a 11% gain; respectable growth in the broader scheme of things.

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. While we note 1Spatial achieved similar EBIT margins to last year, revenue grew by a solid 7.7% to UK£32m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for 1Spatial's future EPS 100% free.

Are 1Spatial 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

It's nice to see that there have been no reports of any insiders selling shares in 1Spatial in the previous 12 months. Add in the fact that Stuart Ritchie, the CFO & Executive Director of the company, paid UK£9.9k for shares at around UK£0.56 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in 1Spatial.

It's commendable to see that insiders have been buying shares in 1Spatial, but there is more evidence of shareholder friendly management. Namely, 1Spatial has a very reasonable level of CEO pay. For companies with market capitalisations under UK£153m, like 1Spatial, the median CEO pay is around UK£282k.

1Spatial's CEO took home a total compensation package worth UK£254k in the year leading up to January 2024. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Does 1Spatial Deserve A Spot On Your Watchlist?

One important encouraging feature of 1Spatial is that it is growing profits. And there's more to love too, with modest CEO remuneration and insider buying interest continuing the positives for the company. If these factors aren't enough to secure 1Spatial a spot on the watchlist, then it certainly warrants a closer look at the very least. We should say that we've discovered 2 warning signs for 1Spatial that you should be aware of before investing here.

The good news is that 1Spatial is not the only stock with insider buying. Here's a list of small cap, undervalued companies in GB with 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.