Is Now The Time To Put G5 Entertainment (STO:G5EN) On Your Watchlist?

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. 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.

So if you're like me, you might be more interested in profitable, growing companies, like G5 Entertainment (STO:G5EN). 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. 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 G5 Entertainment

G5 Entertainment's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. G5 Entertainment managed to grow EPS by 12% per year, over three years. That's a good rate of growth, if it can be sustained.

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. This approach makes G5 Entertainment look pretty good, on balance; although revenue is flattish, EBIT margins improved from 6.5% to 16% in the last year. That's a real positive.

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

Fortunately, we've got access to analyst forecasts of G5 Entertainment's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are G5 Entertainment Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling G5 Entertainment shares, in the last year. With that in mind, it's heartening that Vladislav Suglobov, the Co-Founder of the company, paid kr370k for shares at around kr448 each.

The good news, alongside the insider buying, for G5 Entertainment bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold kr261m worth of its stock. That's a lot of money, and no small incentive to work hard. Those holdings account for over 6.7% of the company; visible skin in the game.

Is G5 Entertainment Worth Keeping An Eye On?

One positive for G5 Entertainment is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. However, before you get too excited we've discovered 1 warning sign for G5 Entertainment that you should be aware of.

The good news is that G5 Entertainment is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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.

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