With EPS Growth And More, Nictus (JSE:NCS) Is Interesting

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. 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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Nictus (JSE:NCS). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Nictus

How Quickly Is Nictus Increasing Earnings Per Share?

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That makes EPS growth an attractive quality for any company. Impressively, Nictus has grown EPS by 30% 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 smiling.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Nictus's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. The good news is that Nictus is growing revenues, and EBIT margins improved by 2.2 percentage points to -23%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

Since Nictus is no giant, with a market capitalization of R41m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Nictus Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

In the last twelve months Nictus insiders spent R86k on stock; good news for shareholders. While this isn't much, we also note an absence of sales. We also note that it was the , Nicolaas Tromp, who made the biggest single acquisition, paying R56k for shares at about R0.56 each.

I do like that insiders have been buying shares in Nictus, but there is more evidence of shareholder friendly management. Specifically, the CEO is paid quite reasonably for a company of this size. For companies with market capitalizations under R3.0b, like Nictus, the median CEO pay is around R4.2m.

The CEO of Nictus was paid just R420k in total compensation for the year ending . This could be considered a token amount, and indicates that the company does not need to use payment to motivate the CEO - that is often a good sign. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Does Nictus Deserve A Spot On Your Watchlist?

You can't deny that Nictus has grown its earnings per share at a very impressive rate. That's attractive. And that's not the only positive, either. We have both insider buying and reasonable and remuneration to consider. On balance the message seems to be that this stock is worth looking at, at least for a while. Before you take the next step you should know about the 5 warning signs for Nictus (2 don't sit too well with us!) that we have uncovered.

As a growth investor I do like to see insider buying. But Nictus 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.

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.

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