- Oops!Something went wrong.Please try again later.
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. 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 Inspiration Healthcare Group (LON:IHC). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. 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.
How Quickly Is Inspiration Healthcare Group Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Over the last three years, Inspiration Healthcare Group has grown EPS by 8.5% per year. That's a pretty good rate, if the company can sustain it.
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). The good news is that Inspiration Healthcare Group is growing revenues, and EBIT margins improved by 2.7 percentage points to 12%, 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.
Inspiration Healthcare Group isn't a huge company, given its market capitalization of UK£94m. That makes it extra important to check on its balance sheet strength.
Are Inspiration Healthcare Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Not only did Inspiration Healthcare Group insiders refrain from selling stock during the year, but they also spent UK£40k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. It is also worth noting that it was CEO & Executive Director Neil Campbell who made the biggest single purchase, worth UK£10.0k, paying UK£0.65 per share.
The good news, alongside the insider buying, for Inspiration Healthcare Group bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have UK£22m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 23% of the company; visible skin in the game.
Is Inspiration Healthcare Group Worth Keeping An Eye On?
As I already mentioned, Inspiration Healthcare Group is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. We don't want to rain on the parade too much, but we did also find 2 warning signs for Inspiration Healthcare Group (1 can't be ignored!) that you need to be mindful of.
The good news is that Inspiration Healthcare Group 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.
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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.