Here's Why We Think Semler Scientific (NASDAQ:SMLR) Might Deserve Your Attention Today

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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

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 Semler Scientific (NASDAQ:SMLR). 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.

Semler Scientific's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Semler Scientific has grown EPS by 19% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

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. Despite consistency in EBIT margins year on year, Semler Scientific has actually recorded a dip in revenue. Suffice it to say that is not a great sign of growth.

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.

View our latest analysis for Semler Scientific

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Semler Scientific's balance sheet strength, before getting too excited.

Are Semler Scientific Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Even though there was some insider selling over the last year, that was outweighed by Independent Chairman of the board Eric Semler's huge outlay of US$1.9m, spent buying shares. The average price paid was about US$37.93. Big purchases like that are well worth noting, especially for those who like to follow the insider money.

Along with the insider buying, another encouraging sign for Semler Scientific is that insiders, as a group, have a considerable shareholding. With a whopping US$70m worth of shares as a group, insiders have plenty riding on the company's success. Amounting to 18% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.

While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because Semler Scientific's CEO, Doug Murphy-Chutorian, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between US$200m and US$800m, like Semler Scientific, the median CEO pay is around US$2.3m.

The CEO of Semler Scientific only received US$1.1m in total compensation for the year ending December 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is Semler Scientific Worth Keeping An Eye On?

For growth investors, Semler Scientific's raw rate of earnings growth is a beacon in the night. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. Astute investors will want to keep this stock on watch. You should always think about risks though. Case in point, we've spotted 2 warning signs for Semler Scientific you should be aware of, and 1 of them shouldn't be ignored.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Semler Scientific, you'll probably love this curated collection of companies in the US that have an attractive valuation alongside 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.