Here's Why We Think ONE Group Hospitality (NASDAQ:STKS) Might Deserve Your Attention Today

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in ONE Group Hospitality (NASDAQ:STKS). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide ONE Group Hospitality with the means to add long-term value to shareholders.

Check out our latest analysis for ONE Group Hospitality

ONE Group Hospitality's Improving Profits

In the last three years ONE Group Hospitality's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, ONE Group Hospitality's EPS shot from US$0.29 to US$0.78, over the last year. Year on year growth of 170% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. ONE Group Hospitality maintained stable EBIT margins over the last year, all while growing revenue 51% to US$311m. 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.

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

Are ONE Group Hospitality Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own ONE Group Hospitality shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at US$54m, they have plenty of motivation to push the business to succeed. That holding amounts to 22% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

Does ONE Group Hospitality Deserve A Spot On Your Watchlist?

ONE Group Hospitality's earnings per share growth have been climbing higher at an appreciable rate. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. At times fast EPS growth is a sign the business has reached an inflection point, so there's a potential opportunity to be had here. So based on this quick analysis, we do think it's worth considering ONE Group Hospitality for a spot on your watchlist. We should say that we've discovered 2 warning signs for ONE Group Hospitality (1 is concerning!) that you should be aware of before investing here.

Although ONE Group Hospitality certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, 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.