Should You Be Adding Copernico Sim (BIT:COP) To Your Watchlist Today?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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 Copernico Sim (BIT:COP). 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 Copernico Sim

Copernico Sim's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Copernico Sim's EPS went from €0.005 to €0.043 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement.

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 Copernico Sim may have maintained EBIT margins over the last year, revenue has fallen. While this may raise concerns, investors should investigate the reasoning behind this.

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.

Copernico Sim isn't a huge company, given its market capitalisation of €8.0m. That makes it extra important to check on its balance sheet strength.

Are Copernico Sim Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

The good news for Copernico Sim shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that President of the Board of Directors Saverio Scelzo bought €16k worth of shares at an average price of around €2.41. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Copernico Sim.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Copernico Sim insiders own more than a third of the company. Owning 46% of the company, insiders have plenty riding on the performance of the the share price. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Valued at only €8.0m Copernico Sim is really small for a listed company. That means insiders only have €3.6m worth of shares, despite the large proportional holding. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is Copernico Sim Worth Keeping An Eye On?

Copernico Sim's earnings per share growth have been climbing higher at an appreciable rate. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Copernico Sim belongs near the top of your watchlist. However, before you get too excited we've discovered 2 warning signs for Copernico Sim (1 is significant!) that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, Copernico Sim isn't the only one. You can see a a curated list of Italian companies which have exhibited consistent growth accompanied by high insider ownership.

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.