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Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
So if you're like me, you might be more interested in profitable, growing companies, like ICC Holdings (NASDAQ:ICCH). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
ICC Holdings's Improving Profits
In the last three years ICC Holdings's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like a firecracker arcing through the night sky, ICC Holdings's EPS shot from US$0.79 to US$2.12, over the last year. You don't see 170% year-on-year growth like that, very often.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of ICC Holdings's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. ICC Holdings shareholders can take confidence from the fact that EBIT margins are up from 5.2% to 12%, and revenue is growing. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
Since ICC Holdings is no giant, with a market capitalization of US$50m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are ICC Holdings Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, 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.
ICC Holdings top brass are certainly in sync, not having sold any shares, over the last year. But the bigger deal is that the VP & Chief Financial Officer, Michael Smith, paid US$63k to buy shares at an average price of US$15.84.
And the insider buying isn't the only sign of alignment between shareholders and the board, since ICC Holdings insiders own more than a third of the company. In fact, they own 45% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. With that sort of holding, insiders have about US$23m riding on the stock, at current prices. That's nothing to sneeze at!
Is ICC Holdings Worth Keeping An Eye On?
ICC Holdings's earnings per share have taken off like a rocket aimed right at the moon. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest ICC Holdings belongs on the top of your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for ICC Holdings you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of ICC Holdings, you'll probably love this free list of growing companies that insiders are buying.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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