Should You Be Adding Gen Digital (NASDAQ:GEN) To Your Watchlist Today?

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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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 Gen Digital (NASDAQ:GEN). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Gen Digital

How Fast Is Gen Digital Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Impressively, Gen Digital has grown EPS by 18% 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.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Gen Digital remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 31% to US$3.8b. That's encouraging news for the company!

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.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Gen Digital.

Are Gen Digital 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While there was some insider selling, that pales in comparison to the US$4.7m that the President & Director, Ondrej Vlcek spent acquiring shares. The average price paid was about US$15.79. It's not often you see purchases like this and so it should be on the radar of everyone who follows Gen Digital.

The good news, alongside the insider buying, for Gen Digital bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enviable stake in the company, worth US$1.3b. This suggests that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Gen Digital To Your Watchlist?

For growth investors, Gen Digital's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant piece of the pie when it comes to the company's stock, and one has been buying more. These things considered, this is one stock worth watching. It is worth noting though that we have found 3 warning signs for Gen Digital (1 is a bit concerning!) that you need to take into consideration.

The good news is that Gen Digital is not the only growth stock with insider buying. Here's 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.

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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.