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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In contrast to all that, I prefer to spend time on companies like ED Invest Spólka Akcyjna (WSE:EDI), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
ED Invest Spólka Akcyjna's Improving Profits
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 the hint of a smile on a face that I love, growing EPS generally makes me look twice. You can imagine, then, that it almost knocked my socks off when I realized that ED Invest Spólka Akcyjna grew its EPS from zł0.15 to zł0.68, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?
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. ED Invest Spólka Akcyjna shareholders can take confidence from the fact that EBIT margins are up from 6.7% to 13%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my 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.
ED Invest Spólka Akcyjna isn't a huge company, given its market capitalization of zł23m. That makes it extra important to check on its balance sheet strength.
Are ED Invest Spólka Akcyjna Insiders Aligned With All Shareholders?
Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that ED Invest Spólka Akcyjna insiders own a significant number of shares certainly appeals to me. In fact, they own 83% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only zł23m ED Invest Spólka Akcyjna is really small for a listed company. So despite a large proportional holding, insiders only have zł19m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!
Is ED Invest Spólka Akcyjna Worth Keeping An Eye On?
ED Invest Spólka Akcyjna's earnings have taken off like any random crypto-currency did, back in 2017. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. 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 ED Invest Spólka Akcyjna for a spot on your watchlist. We don't want to rain on the parade too much, but we did also find 4 warning signs for ED Invest Spólka Akcyjna (3 are significant!) that you need to be mindful of.
Although ED Invest Spólka Akcyjna certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
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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