With EPS Growth And More, Diamond Hill Investment Group (NASDAQ:DHIL) 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. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Diamond Hill Investment Group (NASDAQ:DHIL). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Diamond Hill Investment Group

Diamond Hill Investment Group's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Diamond Hill Investment Group has grown EPS by 15% per year. That's a good rate of growth, if it can be sustained.

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. The good news is that Diamond Hill Investment Group is growing revenues, and EBIT margins improved by 15.2 percentage points to 44%, over the last year. That's great to see, on both counts.

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 profitability drives the upside, prudent investors always check the balance sheet, too.

Are Diamond Hill Investment Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

We do note that Diamond Hill Investment Group insiders netted US$99k worth of shares over the last year. On a brighter note, we see that President Heather Brilliant paid US$130k for shares, at an average acquisition price of US$171 per share. And that's a reason to be optimistic.

On top of the insider buying, it's good to see that Diamond Hill Investment Group insiders have a valuable investment in the business. Indeed, they hold US$19m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 3.6%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

Is Diamond Hill Investment Group Worth Keeping An Eye On?

One important encouraging feature of Diamond Hill Investment Group is that it is growing profits. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. You still need to take note of risks, for example - Diamond Hill Investment Group has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Diamond Hill Investment Group, 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.