Here's Why We Think OUTsurance Group (JSE:OUT) Is Well Worth Watching

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.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like OUTsurance Group (JSE:OUT). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for OUTsurance Group

How Fast Is OUTsurance Group 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. Recognition must be given to the that OUTsurance Group has grown EPS by 54% per year, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

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. It's noted that OUTsurance Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort our analysis of its margins. OUTsurance Group maintained stable EBIT margins over the last year, all while growing revenue 22% to R29b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

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 OUTsurance Group's future profits.

Are OUTsurance Group Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The real kicker here is that OUTsurance Group insiders spent a staggering R47m on acquiring shares in just one year, without single share being sold in the meantime. Knowing this, OUTsurance Group will have have all eyes on them in anticipation for the what could happen in the near future. It is also worth noting that it was CFO & Executive Director Jan Hofmeyr who made the biggest single purchase, worth R20m, paying R42.27 per share.

Is OUTsurance Group Worth Keeping An Eye On?

OUTsurance Group's earnings per share have been soaring, with growth rates sky high. Most growth-seeking investors will find it hard to ignore that sort of explosive EPS growth. And may very well signal a significant inflection point for the business. If this is the case, then keeping a watch over OUTsurance Group could be in your best interest. We should say that we've discovered 1 warning sign for OUTsurance Group that you should be aware of before investing here.

The good news is that OUTsurance Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in ZA 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.