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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. 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.
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 On the Beach Group (LON:OTB). 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 On the Beach Group
On the Beach Group's Improving Profits
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for On the Beach Group to have grown EPS from UK￡0.01 to UK￡0.064 in just one 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?
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. The good news is that On the Beach Group is growing revenues, and EBIT margins improved by 5.2 percentage points to 8.2%, over the last year. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
LSE:OTB Earnings and Revenue History January 3rd 2024
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of On the Beach Group's forecast profits?
Are On the Beach 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. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
In the last year insider at On the Beach Group were both selling and buying shares; but happily, as a group they spent UK￡92k more on stock, than they netted from selling it. Shareholders who may have questioned insiders selling will find some reassurance in this fact. It is also worth noting that it was Chief Marketing Officer & Executive Director Zoe Harris who made the biggest single purchase, worth UK￡53k, paying UK￡1.42 per share.
It's reassuring that On the Beach Group insiders are buying the stock, but that's not the only reason to think management are fair to shareholders. Namely, On the Beach Group has a very reasonable level of CEO pay. For companies with market capitalisations between UK￡158m and UK￡633m, like On the Beach Group, the median CEO pay is around UK￡762k.
The On the Beach Group CEO received UK￡527k in compensation for the year ending September 2023. That comes in below the average for similar sized companies and seems pretty reasonable. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Is On the Beach Group Worth Keeping An Eye On?
On the Beach Group's earnings per share have been soaring, with growth rates sky high. Better yet, we can observe insider buying and the chief executive pay looks reasonable. It could be that On the Beach Group is at an inflection point, given the EPS growth. If so, then its potential for further gains probably merit a spot on your watchlist. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for On the Beach Group that you should be aware of.
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.
