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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like DiaSorin (BIT:DIA). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Check out our latest analysis for DiaSorin
How Fast Is DiaSorin Growing?
As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years DiaSorin grew its EPS by 17% per year. That's a pretty good rate, if the company can sustain it.
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). The good news is that DiaSorin is growing revenues, and EBIT margins improved by 2.5 percentage points to 34%, over the last year. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for DiaSorin's future profits.
Are DiaSorin Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a €9.3b company like DiaSorin. But we do take comfort from the fact that they are investors in the company. Indeed, they have a glittering mountain of wealth invested in it, currently valued at €426m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Does DiaSorin Deserve A Spot On Your Watchlist?
One important encouraging feature of DiaSorin is that it is growing profits. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Now, you could try to make up your mind on DiaSorin by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Although DiaSorin certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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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About BIT:DIA
DiaSorin
Engages in development, manufacture, and distribution of immunodiagnostics and molecular diagnostics testing kits in Europe, Africa, North America, Central and South America, the Asia Pacific, and China.
Adequate balance sheet average dividend payer.
