With EPS Growth And More, Datalab Tehnologije d.d (LJSE:DATG) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and 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. 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.

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

See our latest analysis for Datalab Tehnologije d.d

Datalab Tehnologije d.d's Earnings Per Share Are Growing

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Datalab Tehnologije d.d has managed to grow EPS by 25% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Datalab Tehnologije d.d's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. The music to the ears of Datalab Tehnologije d.d shareholders is that EBIT margins have grown from 17% to 21% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Datalab Tehnologije d.d isn't a huge company, given its market capitalisation of €18m. That makes it extra important to check on its balance sheet strength.

Are Datalab Tehnologije d.d 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 Datalab Tehnologije d.d insiders own a meaningful share of the business. In fact, they own 42% of the shares, making insiders a very influential shareholder group. This should be a welcoming sign for investors because it suggests that the people making the decisions are also impacted by their choices. Of course, Datalab Tehnologije d.d is a very small company, with a market cap of only €18m. So despite a large proportional holding, insiders only have €7.7m worth of stock. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Does Datalab Tehnologije d.d Deserve A Spot On Your Watchlist?

For growth investors, Datalab Tehnologije d.d's raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. You still need to take note of risks, for example - Datalab Tehnologije d.d has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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.