With EPS Growth And More, EL.En (BIT:ELN) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like EL.En (BIT:ELN), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

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EL.En's Earnings Per Share Are Growing

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Over the last three years, EL.En has grown EPS by 11% per year. That's a good rate of growth, if it can be sustained.

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. EBIT margins for EL.En remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.1% to €577m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

See our latest analysis for EL.En

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 EL.En's future profits.

Are EL.En 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

With strong conviction, EL.En insiders have stood united by refusing to sell shares over the last year. But the real excitement comes from the €145k that Non-Executive Director Alberto Pecci spent buying shares (at an average price of about €9.68). Purchases like this clue us in to the to the faith management has in the business' future.

These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for EL.En will reveal that insiders own a significant piece of the pie. Actually, with 36% of the company to their names, insiders are profoundly invested in the business. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. At the current share price, that insider holding is worth a staggering €348m. That level of investment from insiders is nothing to sneeze at.

Should You Add EL.En To Your Watchlist?

As previously touched on, EL.En is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. Now, you could try to make up your mind on EL.En by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

The good news is that EL.En 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.