If EPS Growth Is Important To You, Bell Financial Group (ASX:BFG) Presents An Opportunity

It’s common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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 Bell Financial Group (ASX:BFG). Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

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Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Bell Financial Group grew its EPS by 12% per year. That growth rate is fairly good, assuming the company can keep it up.

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. Our analysis has highlighted that Bell Financial Group’s revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. While we note Bell Financial Group achieved similar EBIT margins to last year, revenue grew by a solid 10% to AU$278m. That’s encouraging news for the company!

The chart below shows how the company’s bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

See our latest analysis for Bell Financial Group

Bell Financial Group isn’t a huge company, given its market capitalisation of AU$398m. That makes it extra important to check on its balance sheet strength.

It’s said that there’s no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.

It’s good to see Bell Financial Group insiders walking the walk, by spending AU$453k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what’s to come. Zooming in, we can see that the biggest insider purchase was by Non-Executive Director Andrew Bell for AU$209k worth of shares, at about AU$1.23 per share.

The good news, alongside the insider buying, for Bell Financial Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold AU$38m worth of its stock. This considerable investment should help drive long-term value in the business. Those holdings account for over 9.5% of the company; visible skin in the game.

One positive for Bell Financial Group is that it is growing EPS. That’s nice to see. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist – and arguably a research priority. We should say that we’ve discovered 1 warning sign for Bell Financial Group that you should be aware of before investing here.

The good news is that Bell Financial Group is not the only stock with insider buying. Here’s a list of small cap, undervalued companies in AU with insider buying in the last three months!

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.