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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.
So if you're like me, you might be more interested in profitable, growing companies, like Thryv Holdings (NASDAQ:THRY). 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. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Quickly Is Thryv Holdings Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. That means EPS growth is considered a real positive by most successful long-term investors. Who among us would not applaud Thryv Holdings's stratospheric annual EPS growth of 48%, compound, over the last three years? Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for the wary stock pickers.
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). Thryv Holdings's EBIT margins have actually improved by 7.3 percentage points in the last year, to reach 21%, but, on the flip side, revenue was down 7.6%. That falls short of ideal.
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.
Fortunately, we've got access to analyst forecasts of Thryv Holdings's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Thryv Holdings Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We do note that, in the last year, insiders sold -US$1.4m worth of shares. But that's far less than the US$5.4m insiders spend purchasing stock. This makes me even more interested in Thryv Holdings because it suggests that those who understand the company best, are optimistic. We also note that it was the Chairman, Joseph Walsh, who made the biggest single acquisition, paying US$3.7m for shares at about US$18.67 each.
The good news, alongside the insider buying, for Thryv Holdings bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enormous stake in the company, worth US$162m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Does Thryv Holdings Deserve A Spot On Your Watchlist?
Thryv Holdings's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Thryv Holdings deserves timely attention. Don't forget that there may still be risks. For instance, we've identified 5 warning signs for Thryv Holdings (1 makes us a bit uncomfortable) you should be aware of.
The good news is that Thryv Holdings 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.