Does IG Group Holdings (LON:IGG) Deserve A Spot On Your Watchlist?
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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like IG Group Holdings (LON:IGG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide IG Group Holdings with the means to add long-term value to shareholders.
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If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, IG Group Holdings has grown EPS by 19% 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.
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. Not all of IG Group Holdings' 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. EBIT margins for IG Group Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 6.2% to UK£1.1b. That's progress.
You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
See our latest analysis for IG Group Holdings
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for IG Group Holdings' future EPS 100% free.
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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The real kicker here is that IG Group Holdings insiders spent a staggering UK£918k on acquiring shares in just one year, without single share being sold in the meantime. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. Zooming in, we can see that the biggest insider purchase was by CEO & Executive Director Breon Corcoran for UK£805k worth of shares, at about UK£10.75 per share.
You can't deny that IG Group Holdings has grown its earnings per share at a very impressive rate. That's attractive. The growth rate should be enticing enough to consider researching the company, and the insider buying is a great added bonus. In essence, your time will not be wasted checking out IG Group Holdings in more detail. We don't want to rain on the parade too much, but we did also find 1 warning sign for IG Group Holdings that you need to be mindful of.
The good news is that IG Group Holdings is not the only stock with insider buying. Here's a list of small cap, undervalued companies in GB with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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