We Ran A Stock Scan For Earnings Growth And 360 Capital Group (ASX:TGP) Passed With Ease
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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like 360 Capital Group (ASX:TGP), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
See our latest analysis for 360 Capital Group
How Fast Is 360 Capital Group Growing Its Earnings Per Share?
Investors and investment funds chase profits, and that means share prices tend rise with positive earnings per share (EPS) outcomes. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that 360 Capital Group grew its EPS from AU$0.024 to AU$0.13, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of 360 Capital Group's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. 360 Capital Group shareholders can take confidence from the fact that EBIT margins are up from 29% to 68%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.
360 Capital Group isn't a huge company, given its market capitalisation of AU$201m. That makes it extra important to check on its balance sheet strength.
Are 360 Capital 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.
The real kicker here is that 360 Capital Group insiders spent a staggering AU$12m on acquiring shares in just one year, without single share being sold in the meantime. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. We also note that it was the Founder and Executive Chairman, Tony Pitt, who made the biggest single acquisition, paying AU$4.9m for shares at about AU$0.82 each.
The good news, alongside the insider buying, for 360 Capital Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold AU$63m worth of its stock. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 31% of the shares on issue for the business, an appreciable amount considering the market cap.
Should You Add 360 Capital Group To Your Watchlist?
360 Capital Group's earnings per share have been soaring, with growth rates sky high. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest 360 Capital Group belongs near the top of your watchlist. Still, you should learn about the 4 warning signs we've spotted with 360 Capital Group (including 2 which shouldn't be ignored).
Keen growth investors love to see insider buying. Thankfully, 360 Capital Group isn't the only one. You can see a a free list of them here.
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.
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