Does LendingClub (NYSE:LC) Deserve A Spot On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 LendingClub (NYSE:LC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide LendingClub with the means to add long-term value to shareholders.

See our latest analysis for LendingClub

LendingClub's Improving Profits

LendingClub has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Outstandingly, LendingClub's EPS shot from US$1.07 to US$2.44, over the last year. Year on year growth of 129% is certainly a sight to behold.

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. Not all of LendingClub'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. On the revenue front, LendingClub has done well over the past year, growing revenue by 19% to US$1.3b but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for LendingClub's future profits.

Are LendingClub 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Shareholders in LendingClub will be more than happy to see insiders committing themselves to the company, spending US$359k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. It is also worth noting that it was Independent Director Allan Landon who made the biggest single purchase, worth US$195k, paying US$10.01 per share.

On top of the insider buying, it's good to see that LendingClub insiders have a valuable investment in the business. Indeed, they hold US$20m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 2.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add LendingClub To Your Watchlist?

LendingClub's earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest LendingClub belongs near the top of your watchlist. Even so, be aware that LendingClub is showing 1 warning sign in our investment analysis , you should know about...

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