Here's Why I Think LSI Industries (NASDAQ:LYTS) Is An Interesting Stock

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 completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.

So if you're like me, you might be more interested in profitable, growing companies, like LSI Industries (NASDAQ:LYTS). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for LSI Industries

How Fast Is LSI Industries Growing Its Earnings Per Share?

In the last three years LSI Industries's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like a wedge-tailed eagle on the wind, LSI Industries's EPS soared from US$0.27 to US$0.38, in just one year. That's a impressive gain of 40%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). LSI Industries maintained stable EBIT margins over the last year, all while growing revenue 51% to US$425m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for LSI Industries?

Are LSI Industries Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

One gleaming positive for LSI Industries, in the last year, is that a certain insider has buying shares with ample enthusiasm. Specifically, the , Richard Fearon, accumulated US$1.2m worth of shares around US$8.16. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.

Should You Add LSI Industries To Your Watchlist?

You can't deny that LSI Industries has grown its earnings per share at a very impressive rate. That's attractive. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. To put it succinctly; LSI Industries is a strong candidate for your watchlist. You should always think about risks though. Case in point, we've spotted 3 warning signs for LSI Industries you should be aware of, and 1 of them doesn't sit too well with us.

The good news is that LSI Industries 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.

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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.