We Ran A Stock Scan For Earnings Growth And Banco di Desio e della Brianza (BIT:BDB) Passed With Ease

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Banco di Desio e della Brianza (BIT:BDB). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Banco di Desio e della Brianza

How Fast Is Banco di Desio e della Brianza Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. To the delight of shareholders, Banco di Desio e della Brianza has achieved impressive annual EPS growth of 48%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Not all of Banco di Desio e della Brianza's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Banco di Desio e della Brianza maintained stable EBIT margins over the last year, all while growing revenue 24% to €538m. That's a real positive.

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

While profitability drives the upside, prudent investors always check the balance sheet, too.

Are Banco di Desio e della Brianza 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.

Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But the bigger deal is that the Chairman of the Board & President, Stefano Lado, paid €150k to buy shares at an average price of €4.00. It seems at least one insider has seen potential in the company's future - and they're willing to put money on the line.

On top of the insider buying, it's good to see that Banco di Desio e della Brianza insiders have a valuable investment in the business. As a matter of fact, their holding is valued at €13m. That's a lot of money, and no small incentive to work hard. While their ownership only accounts for 2.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Should You Add Banco di Desio e della Brianza To Your Watchlist?

Banco di Desio e della Brianza's earnings per share have been soaring, with growth rates sky high. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Banco di Desio e della Brianza belongs near the top of your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Banco di Desio e della Brianza , and understanding these should be part of your investment process.

The good news is that Banco di Desio e della Brianza is not the only stock with insider buying. Here's a list of small cap, undervalued companies in IT 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.