Yahoo Finance Here's Why We Think IRADIMED (NASDAQ:IRMD) Is Well Worth Watching
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like IRADIMED (NASDAQ:IRMD). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide IRADIMED with the means to add long-term value to shareholders.
View our latest analysis for IRADIMED
IRADIMED's Improving Profits
IRADIMED has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. To the delight of shareholders, IRADIMED's EPS soared from US$1.02 to US$1.36, over the last year. That's a commendable gain of 33%.
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. IRADIMED maintained stable EBIT margins over the last year, all while growing revenue 23% to US$66m. That's encouraging news for the company!
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
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 IRADIMED.
Are IRADIMED Insiders Aligned With All Shareholders?
Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So as you can imagine, the fact that IRADIMED insiders own a significant number of shares certainly is appealing. In fact, they own 37% of the shares, making insiders a very influential shareholder group. Shareholders and speculators should be reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have US$196m invested in the business, at the current share price. So there's plenty there to keep them focused!
It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. The median total compensation for CEOs of companies similar in size to IRADIMED, with market caps between US$200m and US$800m, is around US$2.4m.
The IRADIMED CEO received total compensation of just US$586k in the year to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Is IRADIMED Worth Keeping An Eye On?
For growth investors, IRADIMED's raw rate of earnings growth is a beacon in the night. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. The overarching message here is that IRADIMED has underlying strengths that make it worth a look at. Still, you should learn about the 2 warning signs we've spotted with IRADIMED (including 1 which can't be ignored).
Although IRADIMED certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of companies that not only boast of strong growth but have also seen recent insider buying..
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
