Does Novina Spólka Akcyjna (WSE:NOV) Deserve A Spot 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. 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. 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 Novina Spólka Akcyjna (WSE:NOV). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Novina Spólka Akcyjna with the means to add long-term value to shareholders.

Check out our latest analysis for Novina Spólka Akcyjna

Novina Spólka Akcyjna's Improving Profits

Over the last three years, Novina Spólka Akcyjna has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Novina Spólka Akcyjna's EPS skyrocketed from zł0.086 to zł0.11, in just one year; a result that's bound to bring a smile to shareholders. That's a fantastic gain of 29%.

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. The good news is that Novina Spólka Akcyjna is growing revenues, and EBIT margins improved by 11.4 percentage points to 75%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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.

Novina Spólka Akcyjna isn't a huge company, given its market capitalisation of zł13m. That makes it extra important to check on its balance sheet strength.

Are Novina Spólka Akcyjna Insiders Aligned With All Shareholders?

Theory would suggest that it's an encouraging sign to see high insider ownership of a company, since it ties company performance directly to the financial success of its management. So we're pleased to report that Novina Spólka Akcyjna insiders own a meaningful share of the business. Indeed, with a collective holding of 62%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Although, with Novina Spólka Akcyjna being valued at zł13m, this is a small company we're talking about. That means insiders only have zł8.1m worth of shares, despite the large proportional holding. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is Novina Spólka Akcyjna Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Novina Spólka Akcyjna's strong EPS growth. Further, the high level of insider ownership is impressive and suggests that the management appreciates the EPS growth and has faith in Novina Spólka Akcyjna's continuing strength. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Even so, be aware that Novina Spólka Akcyjna is showing 4 warning signs in our investment analysis , and 3 of those shouldn't be ignored...

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.