It’s only natural that many investors, especially those new to the game, would prefer to buy “hot” stocks with a good story, even if those companies are losing money. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you are the patsy.” When buying such historical stocks, investors are all too often the fools.
In the age of investing in the blue sky of tech stocks, my choice may seem old-fashioned; I always prefer profitable businesses like Impax asset management group (LON: IPX). While that doesn’t make stocks worth buying at all costs, you can’t deny that successful capitalism ultimately requires profits. Loss-making businesses always race against time to achieve financial viability, but time is often the friend of the profitable business, especially if it is growing.
See our latest analysis for Impax Asset Management Group
How fast is the Impax Asset Management group growing?
The market is a short-term voting machine, but a long-term weighing machine, so the stock price eventually follows earnings per share (EPS). So it’s no surprise that I like to invest in companies with growing EPS. Impressively, Impax Asset Management Group has increased its EPS by 30% per annum, compounded, over the past three years. As a result, we can understand why the stock is trading at a high multiple of the last twelve months’ earnings.
One way to check how a business is growing is to look at how its income and profit before interest and tax (EBIT) have changed. The good news is that Impax Asset Management Group is increasing its revenues and EBIT margins have improved by 7.1 percentage points to 24%, over the past year. Checking those two boxes is a good sign of growth in my book.
You can take a look at the company’s revenue and profit growth trend, in the graph below. To see the actual numbers, click on the graph.
Fortunately, we have access to the forecasts of the analysts of Impax Asset Management Group future profits. You can make your own predictions without looking, or you can take a look at what the pros are predicting.
Are the insiders of the Impax Asset Management group aligned with all the shareholders?
I like that business leaders have some skin in the game, so to speak, because it increases the alignment of incentives between the people who run the business and its real owners. It is therefore good to see that the insiders of Impax Asset Management Group have a significant amount of capital invested in the stock. Indeed, they have invested a sparkling mountain of wealth, currently valued at £ 241million. This equates to 15% of the company, making insiders powerful and aligned with other shareholders. It may be my imagination, but I feel the glimmer of an opportunity.
Should you add Impax Asset Management Group to your watchlist?
For growth investors like myself, Impax Asset Management Group’s gross earnings growth rate is a beacon overnight. Additionally, the high level of insider ownership impresses me and suggests that I am not the only one enjoying the growth of BPA. So this is most likely the kind of business that I like to spend time researching, in order to discern its true value. Of course, profit growth is one thing, but it’s even better if Impax Asset Management Group receives high returns on equity, as that should mean it can continue to grow without the need for capital. Click on this link to see how it compares to its industry average.
You can invest in any business. But if you’d rather focus on stocks that have been the subject of insider buys, here’s a list of companies that have made insider buys in the past three months.
Please note that the insider trading discussed in this article refers to reportable trades in the relevant jurisdiction.
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.