If You Like EPS Growth Then Check Out PL Group (WSE:PLG) Before It's Too Late

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In contrast to all that, I prefer to spend time on companies like PL Group (WSE:PLG), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for PL Group

How Fast Is PL Group Growing Its Earnings Per Share?

In the last three years PL Group's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, PL Group's EPS shot from zł0.044 to zł0.10, over the last year. Year on year growth of 129% is certainly a sight to behold.

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. PL Group's EBIT margins have actually improved by 113.3 percentage points in the last year, to reach 138%, but, on the flip side, revenue was down 30%. That's not ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

Since PL Group is no giant, with a market capitalization of zł6.5m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are PL Group 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 PL Group insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 69%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Of course, PL Group is a very small company, with a market cap of only zł6.5m. So despite a large proportional holding, insiders only have zł4.4m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Does PL Group Deserve A Spot On Your Watchlist?

PL Group's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering PL Group for a spot on your watchlist. Still, you should learn about the 3 warning signs we've spotted with PL Group (including 2 which are significant) .

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. 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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