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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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. 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.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Love Group Global (ASX:LVE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
How Fast Is Love Group Global Growing Its Earnings Per Share?
Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It is awe-striking that Love Group Global's EPS went from AU$0.005 to AU$0.015 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
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. The music to the ears of Love Group Global shareholders is that EBIT margins have grown from 4.8% to 11% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
ASX:LVE Earnings and Revenue History December 17th 2024
Since Love Group Global is no giant, with a market capitalisation of AU$5.7m, you should definitely check its cash and debtbefore getting too excited about its prospects.
Are Love Group Global Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. 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.
We haven't seen any insiders selling Love Group Global shares, in the last year. Add in the fact that Michael Ye, the Founder of the company, paid AU$70k for shares at around AU$0.13 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.
These recent buys aren't the only encouraging sign for shareholders, as a look at the shareholder registry for Love Group Global will reveal that insiders own a significant piece of the pie. Indeed, with a collective holding of 54%, company insiders are in control and have plenty of capital behind the venture. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. Of course, Love Group Global is a very small company, with a market cap of only AU$5.7m. So this large proportion of shares owned by insiders only amounts to AU$3.1m. That's not a huge stake in absolute terms, but it should help keep insiders aligned with other shareholders.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. That's because on our analysis the CEO, Michael Ye, is paid less than the median for similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Love Group Global with market caps under AU$315m is about AU$466k.
Love Group Global's CEO took home a total compensation package worth AU$409k in the year leading up to June 2024. That comes in below the average for similar sized companies and seems pretty reasonable. 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. Generally, arguments can be made that reasonable pay levels attest to good decision-making.
Should You Add Love Group Global To Your Watchlist?
Love Group Global's earnings per share growth have been climbing higher at an appreciable rate. To sweeten the deal, insiders have significant skin in the game with one even acquiring more. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Love Group Global belongs near the top of your watchlist. However, before you get too excited we've discovered 3 warning signs for Love Group Global (2 are a bit concerning!) that you should be aware of.
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.
