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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 completely lacks a track record of revenue and profit. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like GB Group (LON:GBG). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
See our latest analysis for GB Group
How Fast Is GB Group Growing Its Earnings Per Share?
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Over twelve months, GB Group increased its EPS from UK£0.071 to UK£0.077. That's a modest gain of 8.7%.
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. While we note GB Group's EBIT margins were flat over the last year, revenue grew by a solid 20% to UK£144m. That's a real positive.
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.
Fortunately, we've got access to analyst forecasts of GB Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are GB Group Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Despite -UK£780.2k worth of sales, GB Group insiders have overwhelmingly been buying the stock, spending UK£1.2m on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. We also note that it was the CEO & Executive Director, Christopher Clark, who made the biggest single acquisition, paying UK£282k for shares at about UK£5.18 each.