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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in LifeVantage (NASDAQ:LFVN). While profit is not necessarily a social good, it’s easy to admire a business than can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Quickly Is LifeVantage Increasing Earnings Per Share?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. It certainly is nice to see that LifeVantage has managed to grow EPS by 18% per year over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.
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. While we note LifeVantage’s EBIT margins were flat over the last year, revenue grew by a solid 12% to US$224m. That’s progress.
The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
LifeVantage isn’t a huge company, given its market capitalization of US$177m. That makes it extra important to check on its balance sheet strength.
Are LifeVantage Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.
In the last twelve months LifeVantage insiders spent US$34k on stock; good news for shareholders. This might not be a huge sum, but it’s well worth noting anyway, given the complete lack of selling. It is also worth noting that it was Independent Director Raymond Greer who made the biggest single purchase, worth US$20k, paying US$13.22 per share.
Along with the insider buying, another encouraging sign for LifeVantage is that insiders, as a group, have a considerable shareholding. To be specific, they have US$21m worth of shares. That’s a lot of money, and no small incentive to work hard. That amounts to 12% of the company, demonstrating a degree of high-level alignment with shareholders.
Is LifeVantage Worth Keeping An Eye On?
For growth investors like me, LifeVantage’s raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. Now, you could try to make up your mind on LifeVantage by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that LifeVantage is not the only growth stock with insider buying. Here’s a 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
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.