We performed stock analysis for earnings growth and InMode (NASDAQ:INMD) passed with ease
Investors are often driven by the idea of discovering “the next big thing”, even if that means buying “historic stocks” without any income, let alone profit. But as Peter Lynch said in One Up on Wall Street, “Long shots almost never pay off.” A loss-making company has not yet proven itself with profits, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn’t sit well with you, you might be more interested in profitable and growing businesses, like InMode (NASDAQ: INMD). This does not mean that the company presents the best investment opportunity, but profitability is a key element of business success.
How fast does InMode increase earnings per share?
Typically, companies experiencing earnings per share (EPS) growth should see similar stock price trends. This means EPS growth is seen as a real benefit by most successful long-term investors. Admittedly, InMode has grown EPS by 49% annually over the past three years. Such rapid growth may well be fleeting, but it should be more than enough to pique the interest of wary stock pickers.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. InMode’s EBIT margins have remained virtually unchanged over the past year, but the company should be pleased to report revenue growth for the period of 40% to $404 million. This is encouraging news for the company!
The chart below shows how the company’s top and bottom line has grown over time. For more details, click on the image.
Of course, the trick is to find stocks that have their best days in the future, not in the past. You can of course base your opinion on past performance, but you can also check out this interactive professional analyst EPS forecast chart for InMode.
Are InMode Insiders Aligned with All Shareholders?
This should give investors a sense of security in owning stock in a company if insiders also own stock, creating a close alignment of their interests. So it’s good to see that InMode insiders have significant capital invested in the stock. Indeed, they have invested considerable wealth in it, currently valued at US$451 million. This represents 17% of the shares of the company. What directs the decision-making process of management towards a path that benefits shareholders the most. So there is an opportunity here to invest in a company whose management has tangible incentives to deliver.
Is InMode worth watching?
InMode’s revenue took off quite impressively. This type of growth is nothing short of eye-catching, and the significant investment held by insiders should certainly inform the company’s vision. Sometimes rapid EPS growth is a sign that the business has reached an inflection point, so there is a potential opportunity here. Based on the sum of its parts, we really think InMode is worth taking a very close look at. Before proceeding to the next step, you must know the 1 warning sign for InMode that we discovered.
There is always the possibility of doing well by buying stocks that are not increased income and not have insiders buying stocks. But for those who consider these measures important, we encourage you to check out the companies that do have these characteristics. You can access a free list of them here.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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