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 completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like International General Insurance Holdings (NASDAQ:IGIC). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
International General Insurance Holdings's Improving Profits
Over the last three years, International General Insurance Holdings has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, International General Insurance Holdings's EPS shot from US$0.36 to US$0.97, over the last year. You don't see 171% year-on-year growth like that, very often. That could be a sign that the business has reached a true inflection point.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of International General Insurance Holdings's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. International General Insurance Holdings maintained stable EBIT margins over the last year, all while growing revenue 29% to US$331m. 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.
While profitability drives the upside, prudent investors always check the balance sheet, too.
Are International General Insurance Holdings 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
One gleaming positive for International General Insurance Holdings, in the last year, is that a certain insider has buying shares with ample enthusiasm. Indeed, Founder Wasef Jabsheh has accumulated shares over the last year, paying a total of US$2.2m at an average price of about US$6.90. Big insider buys like that are almost as rare as an ocean free of single use plastic waste.
Along with the insider buying, another encouraging sign for International General Insurance Holdings is that insiders, as a group, have a considerable shareholding. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$148m. That equates to 34% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Does International General Insurance Holdings Deserve A Spot On Your Watchlist?
International General Insurance Holdings's earnings have taken off like any random crypto-currency did, back in 2017. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe International General Insurance Holdings deserves timely attention. You still need to take note of risks, for example - International General Insurance Holdings has 2 warning signs we think you should be aware of.
As a growth investor I do like to see insider buying. But International General Insurance Holdings isn't the only one. You can see a a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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