Do I.B.I Investment House's (TLV:IBI) Earnings Warrant Your Attention?

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 Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like I.B.I Investment House (TLV:IBI). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

See our latest analysis for I.B.I Investment House

I.B.I Investment House'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. We can see that in the last three years I.B.I Investment House grew its EPS by 17% per year. That growth rate is fairly good, assuming the company can keep it up.

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). Not all of I.B.I Investment House's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. The good news is that I.B.I Investment House is growing revenues, and EBIT margins improved by 6.1 percentage points to 30%, over the last year. Ticking those two boxes is a good sign of growth, in my book.

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.

Since I.B.I Investment House is no giant, with a market capitalization of ₪756m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are I.B.I Investment House Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So we're pleased to report that I.B.I Investment House insiders own a meaningful share of the business. Indeed, with a collective holding of 84%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. In terms of absolute value, insiders have ₪634m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Is I.B.I Investment House Worth Keeping An Eye On?

One positive for I.B.I Investment House is that it is growing EPS. That's nice to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. What about risks? Every company has them, and we've spotted 4 warning signs for I.B.I Investment House (of which 2 are potentially serious!) you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access 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. 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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