Yahoo Finance Is Now The Time To Put Elegant Hotels Group (LON:EHG) On Your Watchlist?
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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Elegant Hotels Group (LON:EHG). 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.
View our latest analysis for Elegant Hotels Group
How Quickly Is Elegant Hotels Group 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. It's no surprise, then, that I like to invest in companies with EPS growth. Elegant Hotels Group managed to grow EPS by 12% per year, over three years. That's a good rate of growth, if it can be sustained.
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. Elegant Hotels Group's EBIT margins have actually improved by 4.6 percentage points in the last year, to reach 23%, but, on the flip side, revenue was down 3.7%. That's not ideal.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
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 Elegant Hotels Group.
Are Elegant Hotels Group 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The good news for Elegant Hotels Group shareholders is that no insiders reported selling shares in the last year. With that in mind, it's heartening that Simon M. Sherwood, the Non-Executive Chairman of the company, paid US$40k for shares at around US$0.70 each.
Along with the insider buying, another encouraging sign for Elegant Hotels Group is that insiders, as a group, have a considerable shareholding. To be specific, they have US$10m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 17% of the company; visible skin in the game.
Should You Add Elegant Hotels Group To Your Watchlist?
As I already mentioned, Elegant Hotels Group is a growing business, which is what I like to see. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for my watchlist - and arguably a research priority. Now, you could try to make up your mind on Elegant Hotels Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that Elegant Hotels 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
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If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
