Here's Why I Think InfraCom Group (NGM:INFRA) Might Deserve Your Attention Today

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. 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 InfraCom Group (NGM:INFRA). 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. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

View our latest analysis for InfraCom Group

InfraCom Group's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Like a falcon taking flight, InfraCom Group's EPS soared from kr0.48 to kr0.65, over the last year. That's a commendable gain of 36%.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. InfraCom Group maintained stable EBIT margins over the last year, all while growing revenue 13% to kr229m. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Since InfraCom Group is no giant, with a market capitalization of kr840m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are InfraCom 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 InfraCom Group insiders own a significant number of shares certainly appeals to me. In fact, they own 69% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This makes me think they will be incentivised to plan for the long term - something I like to see. In terms of absolute value, insiders have kr583m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add InfraCom Group To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about InfraCom Group's strong EPS growth. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. So this is very likely the kind of business that I like to spend time researching, with a view to discerning its true value. We don't want to rain on the parade too much, but we did also find 2 warning signs for InfraCom Group that you need to be mindful of.

Although InfraCom Group 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. 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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