Here's Why We Think Image Systems (STO:IS) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Image Systems (STO:IS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Image Systems with the means to add long-term value to shareholders.

Check out our latest analysis for Image Systems

Image Systems' Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. Commendations have to be given in seeing that Image Systems grew its EPS from kr0.013 to kr0.066, in one short year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

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. The good news is that Image Systems is growing revenues, and EBIT margins improved by 2.3 percentage points to 3.7%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Since Image Systems is no giant, with a market capitalisation of kr137m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Image Systems 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

It's nice to see that there have been no reports of any insiders selling shares in Image Systems in the previous 12 months. Add in the fact that Anders Fransson, the Independent Chairman of the company, paid kr247k for shares at around kr1.34 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

Does Image Systems Deserve A Spot On Your Watchlist?

Image Systems' earnings per share have been soaring, with growth rates sky high. Growth-minded people will be intrigued by the incredible movement in EPS growth. And may very well signal a significant inflection point for the business. If this these factors intrigue you, then an addition of Image Systems to your watchlist won't go amiss. However, before you get too excited we've discovered 3 warning signs for Image Systems that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Image Systems, you'll probably love this free list of growing companies that insiders are buying.

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.