Should You Be Adding Accordant Group (NZSE:AGL) To Your Watchlist Today?

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In contrast to all that, I prefer to spend time on companies like Accordant Group (NZSE:AGL), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Accordant Group

Accordant Group's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Accordant Group managed to grow EPS by 5.2% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.

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). To cut to the chase Accordant Group's EBIT margins dropped last year, and so did its revenue. That is, not a hint of euphemism here, suboptimal.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Accordant Group is no giant, with a market capitalization of NZ$50m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Accordant Group Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Accordant Group shares, in the last year. So it's definitely nice that Independent Chairman Ross Keenan bought NZ$49k worth of shares at an average price of around NZ$1.45.

On top of the insider buying, we can also see that Accordant Group insiders own a large chunk of the company. In fact, they own 71% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. With that sort of holding, insiders have about NZ$35m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

Does Accordant Group Deserve A Spot On Your Watchlist?

One important encouraging feature of Accordant Group is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. You should always think about risks though. Case in point, we've spotted 4 warning signs for Accordant Group you should be aware of, and 1 of them can't be ignored.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Accordant Group, you'll probably love this free list of growing companies that insiders are buying.

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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