Does SOL (BIT:SOL) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like SOL (BIT:SOL), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide SOL with the means to add long-term value to shareholders.

View our latest analysis for SOL

SOL'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. That makes EPS growth an attractive quality for any company. Impressively, SOL has grown EPS by 31% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. It's noted that SOL's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. While we note SOL achieved similar EBIT margins to last year, revenue grew by a solid 21% to €1.5b. That's progress.

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.

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check SOL's balance sheet strength, before getting too excited.

Are SOL Insiders Aligned With All Shareholders?

It's a necessity that company leaders act in the best interest of shareholders and so insider investment always comes as a reassurance to the market. SOL followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at €71m, they have plenty of motivation to push the business to succeed. This should keep them focused on creating long term value for shareholders.

Should You Add SOL To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into SOL's strong EPS growth. This EPS growth rate is something the company should be proud of, and so it's no surprise that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research, so it would seem that it's a good stock to follow. What about risks? Every company has them, and we've spotted 1 warning sign for SOL you should know about.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a free list of them here.

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.