Should You Be Adding Investeko (WSE:IVE) To Your Watchlist Today?

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Investeko (WSE:IVE), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Investeko

How Fast Is Investeko Growing Its Earnings Per Share?

Over the last three years, Investeko has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Investeko's EPS shot from zł0.11 to zł0.23, over the last year. Year on year growth of 112% is certainly a sight to behold. The best case scenario? That the business has hit a true inflection point.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. While we note Investeko's EBIT margins were flat over the last year, revenue grew by a solid 31% to zł8.5m. That's a real positive.

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.

Investeko isn't a huge company, given its market capitalization of zł20m. That makes it extra important to check on its balance sheet strength.

Are Investeko Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Investeko insiders own a significant number of shares certainly appeals to me. In fact, they own 68% 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. Of course, Investeko is a very small company, with a market cap of only zł20m. So despite a large proportional holding, insiders only have zł14m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Is Investeko Worth Keeping An Eye On?

Investeko's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Investeko for a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Investeko (of which 1 is potentially serious!) you should know about.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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.