Yahoo Finance Here's Why I Think Proteome Sciences (LON:PRM) Might Deserve Your Attention Today
It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Proteome Sciences (LON:PRM). 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.
Check out our latest analysis for Proteome Sciences
How Fast Is Proteome Sciences Growing Its Earnings Per Share?
In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Proteome Sciences grew its EPS from UK£0.00021 to UK£0.0013, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. This approach makes Proteome Sciences look pretty good, on balance; although revenue is flattish, EBIT margins improved from 4.8% to 12% in the last year. That's something to smile about.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
Proteome Sciences isn't a huge company, given its market capitalization of UK£16m. That makes it extra important to check on its balance sheet strength.
Are Proteome Sciences Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, 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.
We note that Proteome Sciences insiders spent UK£78k on stock, over the last year; in contrast, we didn't see any selling. That's nice to see, because it suggests insiders are optimistic. It is also worth noting that it was Independent Non Executive Director Roger McDowell who made the biggest single purchase, worth UK£45k, paying UK£0.05 per share.
Does Proteome Sciences Deserve A Spot On Your Watchlist?
Proteome Sciences's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Growth investors should find it difficult to look past that strong EPS move. And in fact, it could well signal a fundamental shift in the business economics. For me, this situation certainly piques my interest. We don't want to rain on the parade too much, but we did also find 3 warning signs for Proteome Sciences (2 can't be ignored!) that you need to be mindful of.
As a growth investor I do like to see insider buying. But Proteome Sciences 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.
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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.
