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. 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.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like 51Talk Online Education Group (NYSE:COE). 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.
How Fast Is 51Talk Online Education Group Growing Its Earnings Per Share?
51Talk Online Education Group has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Impressively, 51Talk Online Education Group's EPS catapulted from US$0.32 to US$0.57, over the last year. Year on year growth of 80% is certainly a sight to behold.
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. 51Talk Online Education Group's EBIT margins have actually improved by 12.6 percentage points in the last year, to reach 13%, but, on the flip side, revenue was down 56%. That falls short of ideal.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
51Talk Online Education Group isn't a huge company, given its market capitalisation of US$38m. That makes it extra important to check on its balance sheet strength.
Are 51Talk Online Education 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
One shining light for 51Talk Online Education Group is the serious outlay one insider has made to buy shares, in the last year. In one big hit, Founder Jiajia Huang paid US$937k, for shares at an average price of US$1.59 per share. Seeing such high conviction in the company is a huge positive for shareholders and should instil confidence in their mission.
Does 51Talk Online Education Group Deserve A Spot On Your Watchlist?
51Talk Online Education Group's earnings per share growth have been climbing higher at an appreciable rate. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. If this these factors intrigue you, then an addition of 51Talk Online Education Group to your watchlist won't go amiss. Even so, be aware that 51Talk Online Education Group is showing 3 warning signs in our investment analysis , you should know about...
There are plenty of other companies that have insiders buying up shares. So if you like the sound of 51Talk Online Education Group, you'll probably love this free list of growing companies that insiders are buying.
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.
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