Is Now The Time To Put Smartoptics Group (OB:SMOP) On Your Watchlist?

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.

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 Smartoptics Group (OB:SMOP). 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.

Check out the opportunities and risks within the XX Communications industry.

Smartoptics Group's Improving Profits

Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Impressively, Smartoptics Group's EPS catapulted from kr0.21 to kr0.48, over the last year. Year on year growth of 127% is certainly a sight to behold.

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. Smartoptics Group shareholders can take confidence from the fact that EBIT margins are up from 7.7% to 14%, and revenue is growing. 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.

Smartoptics Group isn't a huge company, given its market capitalisation of kr1.4b. That makes it extra important to check on its balance sheet strength.

Are Smartoptics Group Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

We haven't seen any insiders selling Smartoptics Group shares, in the last year. With that in mind, it's heartening that Carina Osmund, the Chief Operating Officer of the company, paid kr91k for shares at around kr13.00 each. Purchases like this can help the investors understand the views of the management team; in which case they see some potential in Smartoptics Group.

Is Smartoptics Group Worth Keeping An Eye On?

Smartoptics Group's earnings have taken off in quite an impressive fashion. Growth investors should find it difficult to look past that strong EPS move. And may very well signal a significant inflection point for the business. If this is the case, then keeping a watch over Smartoptics Group could be in your best interest. You still need to take note of risks, for example - Smartoptics Group has 1 warning sign we think you should be aware of.

The good news is that Smartoptics Group is not the only growth stock with insider buying. Here's a list of them... 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.