Do Proact IT Group's (STO:PACT) Earnings Warrant Your Attention?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Proact IT Group (STO:PACT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Proact IT Group

How Fast Is Proact IT Group Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Proact IT Group has grown EPS by 25% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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. It was a year of stability for Proact IT Group as both revenue and EBIT margins remained have been flat over the past year. While this doesn't ring alarm bells, it may not meet the expectations of growth-minded investors.

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.

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

Are Proact IT Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Not only did Proact IT Group insiders refrain from selling stock during the year, but they also spent kr1.5m buying it. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was VP of People & Sustainability Madeleine Samuelson who made the biggest single purchase, worth kr301k, paying kr152 per share.

Should You Add Proact IT Group To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into Proact IT Group's strong EPS growth. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. So on this analysis, Proact IT Group is probably worth spending some time on. We don't want to rain on the parade too much, but we did also find 1 warning sign for Proact IT Group that you need to be mindful of.

The good news is that Proact IT Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in SE 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.

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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.