The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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 can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Australian Wealth Advisors Group (ASX:WAG). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
Check out our latest analysis for Australian Wealth Advisors Group
How Fast Is Australian Wealth Advisors Group Growing Its Earnings Per Share?
Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So it's no surprise that some investors are more inclined to invest in profitable businesses. It is awe-striking that Australian Wealth Advisors Group's EPS went from AU$0.0015 to AU$0.0053 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.
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. While we note Australian Wealth Advisors Group achieved similar EBIT margins to last year, revenue grew by a solid 32% to AU$12m. That's a real positive.
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.
Since Australian Wealth Advisors Group is no giant, with a market capitalisation of AU$24m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Australian Wealth Advisors Group 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. 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 Australian Wealth Advisors Group insiders spent AU$197k on stock, over the last year; in contrast, we didn't see any selling. This is a good look for the company as it paints an optimistic picture for the future. Zooming in, we can see that the biggest insider purchase was by Executive Chairman Lee Darion IaFraté for AU$72k worth of shares, at about AU$0.29 per share.
On top of the insider buying, we can also see that Australian Wealth Advisors Group insiders own a large chunk of the company. Indeed, with a collective holding of 54%, company insiders are in control and have plenty of capital behind the venture. Intuition will tell you this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only AU$24m Australian Wealth Advisors Group is really small for a listed company. So despite a large proportional holding, insiders only have AU$13m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!
Does Australian Wealth Advisors Group Deserve A Spot On Your Watchlist?
Australian Wealth Advisors Group's earnings per share have been soaring, with growth rates sky high. What's more, insiders own a significant stake in the company and have been buying more shares. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Australian Wealth Advisors Group belongs near the top of your watchlist. We should say that we've discovered 3 warning signs for Australian Wealth Advisors Group (1 is concerning!) that you should be aware of before investing here.
The good news is that Australian Wealth Advisors Group is not the only stock with insider buying. Here's a list of small cap, undervalued companies in AU 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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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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