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We Ran A Stock Scan For Earnings Growth And Black Diamond Group (TSE:BDI) Passed With Ease

·4 min read

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. 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Black Diamond Group (TSE:BDI), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

Check out our latest analysis for Black Diamond Group

Black Diamond Group's Improving Profits

Strong earnings per share (EPS) results are an indicator of a company achieving solid profits, which investors look upon favourably and so the share price tends to reflect great EPS performance. So for many budding investors, improving EPS is considered a good sign. Commendations have to be given in seeing that Black Diamond Group grew its EPS from CA$0.018 to CA$0.41, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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 Black Diamond Group shareholders is that EBIT margins have grown from 3.8% to 9.6% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Black Diamond Group's future profits.

Are Black Diamond Group Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.

While Black Diamond Group insiders did net CA$149k selling stock over the last year, they invested CA$417k, a much higher figure. An optimistic sign for those with Black Diamond Group in their watchlist. Zooming in, we can see that the biggest insider purchase was by Independent Director Edward Kernaghan for CA$158k worth of shares, at about CA$3.35 per share.

On top of the insider buying, it's good to see that Black Diamond Group insiders have a valuable investment in the business. Indeed, they hold CA$57m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 24% of the shares on issue for the business, an appreciable amount considering the market cap.

Should You Add Black Diamond Group To Your Watchlist?

Black Diamond Group's earnings have taken off in quite an impressive fashion. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Black Diamond Group deserves timely attention. You should always think about risks though. Case in point, we've spotted 1 warning sign for Black Diamond Group you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Black Diamond Group 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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