For starters, it might seem like a good idea (and an exciting prospect) to buy a company that tells investors a good story, even if it completely lacks a track record of revenue and earnings. Unfortunately, high-risk investments are often unlikely to ever return, and many investors pay a price to learn their lesson.
So if you’re like me, you might be more interested in profitable and growing companies, like PSI software (ETR: PSAN). Even if stocks are fully valued today, most capitalists would recognize its earnings as a demonstration of consistent value generation. Conversely, a loss-making business has yet to prove itself with profits, and eventually the sweet milk of outside capital can turn sour.
Check out our latest analysis for PSI Software
PSI Software’s earnings per share increase.
If a company can keep increasing its earnings per share (EPS) long enough, its stock price will eventually follow. So it’s no surprise that I like investing in EPS growth companies. We can see that over the past three years, PSI Software has grown its EPS by 9.3% per year. This growth rate is quite good, assuming the company can sustain it.
I like to take a look at earnings before interest and tax margins (EBIT), as well as revenue growth, to get another view of the quality of the company’s growth. The good news is that PSI Software is growing revenue and EBIT margins have improved by 2.1 percentage points to 8.6% compared to last year. Checking those two boxes is a good sign of growth, in my book.
The graph below shows how the company’s bottom line and top results have grown over time. For more details, click on the image.
Luckily, we have access to analyst forecasts from PSI Software future profits. You can make your own predictions without looking, or you can take a peek at what the pros are predicting.
Are PSI Software Insiders Aligned with All Shareholders?
I feel safer owning stock in a company if insiders also own stock, thereby aligning our interests more closely. Accordingly, I am encouraged that insiders hold PSI Software stock of considerable value. With a whopping 56 million in shares as a group, insiders have a lot to do with the company’s success. This stake amounts to 9.3% of the issued shares, making insiders influential and aligned owners of the company.
It means a lot to see insiders invested in the company, but I wonder if the compensation policies are shareholder-friendly. Well, based on the CEO’s salary, I’d say they are indeed. For companies with a market capitalization between €353 million and €1.4 billion, such as PSI Software, the median CEO salary is around €1.2 million.
PSI Software offered total compensation worth €981,000 to its CEO during the year at . This is below average for companies of a similar size and seems pretty reasonable to me. CEO pay levels aren’t the most important metric for investors, but when the salary is modest, it promotes better alignment between the CEO and ordinary shareholders. I would also say that reasonable levels of compensation attest to good decision-making more generally.
Is PSI software worth watching?
A plus point for PSI Software is that it increases EPS. It’s nice to see. The fact that EPS is growing is a real plus for PSI Software, but the pretty picture is better than that. Boasting both a modest CEO salary and considerable insider ownership, I’d say this one deserves at least the watch list. However, you should always think about the risks. Concrete example, we spotted 1 warning sign for PSI software you should be aware.
Of course, you can (sometimes) buy stocks that are not increased income and not have insiders buying stocks. But as a growth investor, I always like to check out companies that To 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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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.