Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. 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 Learning Technologies Group (LON:LTG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Learning Technologies Group with the means to add long-term value to shareholders.
Learning Technologies Group's Earnings Per Share Are Growing
The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Impressively, Learning Technologies Group has grown EPS by 29% per year, compound, in the last three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. On the one hand, Learning Technologies Group's EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.
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.
AIM:LTG Earnings and Revenue History March 4th 2023
Fortunately, we've got access to analyst forecasts of Learning Technologies 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 Learning Technologies Group Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. Because often, 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.
We note that Learning Technologies Group insiders spent UK£123k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by CFO & Director Katharina H. Kearney-Croft for UK£100k worth of shares, at about UK£1.22 per share.
Along with the insider buying, another encouraging sign for Learning Technologies Group is that insiders, as a group, have a considerable shareholding. Indeed, they have a considerable amount of wealth invested in it, currently valued at UK£301m. That equates to 26% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.
While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Learning Technologies Group's CEO, Jonathan Satchell, is paid at a relatively modest level when compared to other CEOs for companies of this size. The median total compensation for CEOs of companies similar in size to Learning Technologies Group, with market caps between UK£834m and UK£2.7b, is around UK£1.8m.
The Learning Technologies Group CEO received total compensation of just UK£638k in the year to December 2021. That's clearly well below average, so at a glance that arrangement seems generous to shareholders and points to a modest remuneration culture. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of good governance, more generally.
Should You Add Learning Technologies Group To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Learning Technologies Group's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. These things considered, this is one stock worth watching. Still, you should learn about the 2 warning signs we've spotted with Learning Technologies Group.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
