Here's Why I Think Inno-Gene (WSE:IGN) Is An Interesting Stock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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.

In contrast to all that, I prefer to spend time on companies like Inno-Gene (WSE:IGN), 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. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Inno-Gene

How Fast Is Inno-Gene Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that Inno-Gene's EPS went from zł0.17 to zł1.35 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. The good news is that Inno-Gene is growing revenues, and EBIT margins improved by 20.7 percentage points to 44%, over the last year. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

Inno-Gene isn't a huge company, given its market capitalization of zł51m. That makes it extra important to check on its balance sheet strength.

Are Inno-Gene 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. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We haven't seen any insiders selling Inno-Gene shares, in the last year. With that in mind, it's heartening that Jacek Wojciechowicz, the President of the Management Board of the company, paid zł41k for shares at around zł10.23 each.

And the insider buying isn't the only sign of alignment between shareholders and the board, since Inno-Gene insiders own more than a third of the company. Actually, with 41% of the company to their names, insiders are profoundly invested in the business. I'm always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Valued at only zł51m Inno-Gene is really small for a listed company. That means insiders only have zł21m worth of shares, despite the large proportional holding. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.

Does Inno-Gene Deserve A Spot On Your Watchlist?

Inno-Gene's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Inno-Gene deserves timely attention. Don't forget that there may still be risks. For instance, we've identified 3 warning signs for Inno-Gene (1 is a bit concerning) you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Inno-Gene, 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. 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.