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Does AbCellera Biologics (NASDAQ:ABCL) 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.' 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 AbCellera Biologics (NASDAQ:ABCL). 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 AbCellera Biologics

AbCellera Biologics' Improving Profits

In the last three years AbCellera Biologics' earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. AbCellera Biologics boosted its trailing twelve month EPS from US$0.71 to US$0.87, in the last year. This amounts to a 22% gain; a figure that shareholders will be pleased to see.

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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. On the one hand, AbCellera Biologics' EBIT margins fell over the last year, but on the other hand, revenue grew. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

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.

earnings-and-revenue-history
earnings-and-revenue-history

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of AbCellera Biologics' forecast profits?

Are AbCellera Biologics Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news is that AbCellera Biologics insiders spent a whopping US$19m on stock in just one year, without so much as a single sale. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. It is also worth noting that it was CEO, President & Chairperson Carl Hansen who made the biggest single purchase, worth US$9.0m, paying US$6.41 per share.

The good news, alongside the insider buying, for AbCellera Biologics bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$810m. This totals to 27% of shares in the company. Enough to lead management's decision making process down a path that brings the most benefit to shareholders. Looking very optimistic for investors.

Should You Add AbCellera Biologics To Your Watchlist?

One positive for AbCellera Biologics is that it is growing EPS. That's nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. You still need to take note of risks, for example - AbCellera Biologics has 2 warning signs we think you should be aware of.

Keen growth investors love to see insider buying. Thankfully, AbCellera Biologics isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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