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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. 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. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like System1 Group (LON:SYS1). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide System1 Group with the means to add long-term value to shareholders.
View our latest analysis for System1 Group
How Quickly Is System1 Group Increasing Earnings Per Share?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. Over the last three years, System1 Group has grown EPS by 5.7% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of System1 Group shareholders is that EBIT margins have grown from 6.5% to 13% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.
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.
System1 Group isn't a huge company, given its market capitalisation of UK£79m. That makes it extra important to check on its balance sheet strength.
Are System1 Group Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
A great takeaway for shareholders is that company insiders within System1 Group have collectively spent UK£21k acquiring shares in the company. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling. Zooming in, we can see that the biggest insider purchase was by Independent Non-Executive Director Conrad Bona for UK£14k worth of shares, at about UK£6.29 per share.