For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.
In contrast to all that, many investors prefer to focus on companies like Donegal Group (NASDAQ:DGIC.A), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
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Donegal Group's Earnings Per Share Are Growing
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. It certainly is nice to see that Donegal Group has managed to grow EPS by 21% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Donegal Group shareholders can take confidence from the fact that EBIT margins are up from 0.6% to 6.4%, and revenue is growing. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
NasdaqGS:DGIC.A Earnings and Revenue History April 17th 2025
Are Donegal Group Insiders Aligned With All Shareholders?
It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
For the sake of balance, it should be noted that Donegal Group insiders sold US$14k worth of shares last year. But this is outweighed by the trades from Independent Director Jack Hess who spent US$78k buying shares, at an average price of around US$15.60. Overall, that is something good to take away.
It's reassuring that Donegal Group insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Namely, Donegal Group has a very reasonable level of CEO pay. For companies with market capitalisations between US$400m and US$1.6b, like Donegal Group, the median CEO pay is around US$3.8m.
The CEO of Donegal Group only received US$1.5m in total compensation for the year ending December 2024. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Is Donegal Group Worth Keeping An Eye On?
For growth investors, Donegal Group's raw rate of earnings growth is a beacon in the night. And that's not the only positive either. We have both insider buying and reasonable and remuneration to consider. The overriding message from this quick rundown is yes, this stock is worth investigating further. Now, you could try to make up your mind on Donegal Group by focusing on just these factors, oryou could also consider how its price-to-earnings ratio compares to other companies in its industry.
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.
