With EPS Growth And More, Zenicor Medical Systems (NGM:ZENI) Is Interesting

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone 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 the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Zenicor Medical Systems (NGM:ZENI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. 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 Zenicor Medical Systems

How Fast Is Zenicor Medical Systems Growing Its Earnings Per Share?

In a capitalist society capital chases profits, and that means share prices tend rise with earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Zenicor Medical Systems grew its EPS from kr0.00072 to kr0.098, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.

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. Zenicor Medical Systems shareholders can take confidence from the fact that EBIT margins are up from 1.7% to 4.3%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

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.

Since Zenicor Medical Systems is no giant, with a market capitalization of kr129m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Zenicor Medical Systems 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 we're pleased to report that Zenicor Medical Systems insiders own a meaningful share of the business. Actually, with 42% of the company to their names, insiders are profoundly invested in the business. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. Of course, Zenicor Medical Systems is a very small company, with a market cap of only kr129m. So despite a large proportional holding, insiders only have kr54m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Does Zenicor Medical Systems Deserve A Spot On Your Watchlist?

Zenicor Medical Systems's earnings have taken off like any random crypto-currency did, back in 2017. 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 to my mind Zenicor Medical Systems is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. You should always think about risks though. Case in point, we've spotted 4 warning signs for Zenicor Medical Systems you should be aware of, and 1 of them is a bit unpleasant.

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.