Should You Be Adding Nextcom (TLV:NXTM) To Your Watchlist Today?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Nextcom (TLV:NXTM). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.

View our latest analysis for Nextcom

How Fast Is Nextcom 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. Impressively, Nextcom has grown EPS by 34% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Nextcom maintained stable EBIT margins over the last year, all while growing revenue 2.5% to ₪355m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

Since Nextcom is no giant, with a market capitalization of ₪160m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Nextcom 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 Nextcom insiders own a meaningful share of the business. Indeed, with a collective holding of 64%, 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 ₪103m invested in the business, using the current share price. That's nothing to sneeze at!

Does Nextcom Deserve A Spot On Your Watchlist?

For growth investors like me, Nextcom's raw rate of earnings growth is a beacon in the night. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. Still, you should learn about the 3 warning signs we've spotted with Nextcom .

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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. 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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