February 22, 2024

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I Ran A Stock Scan For Earnings Growth And Azure Healthcare (ASX:AZV) Passed With Ease

Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Azure Healthcare (ASX:AZV). While that doesn’t make the shares worth buying at any price, you can’t deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Azure Healthcare

How Fast Is Azure Healthcare Growing Its Earnings Per Share?

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. You can imagine, then, that it almost knocked my socks off when I realized that Azure Healthcare grew its EPS from AU$0.0012 to AU$0.0081, in one short year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company’s growth. Azure Healthcare shareholders can take confidence from the fact that EBIT margins are up from 1.3% to 4.5%, and revenue is growing. That’s great to see, on both counts.

You can take a look at the company’s revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history

Azure Healthcare isn’t a huge company, given its market capitalization of AU$21m. That makes it extra important to check on its balance sheet strength.

Are Azure Healthcare Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.

Any way you look at it Azure Healthcare shareholders can gain quiet confidence from the fact that insiders shelled out AU$856k to buy stock, over the last year. When you contrast that with the complete lack of sales, it’s easy for shareholders to brim with joyful expectancy. It is also worth noting that it was John Bennetts who made the biggest single purchase, worth AU$500k, paying AU$0.068 per share.

And the insider buying isn’t the only sign of alignment between shareholders and the board, since Azure Healthcare insiders own more than a third of the company. Actually, with 43% of the company to their names, insiders are profoundly invested in the business. I’m always comforted by solid insider ownership like this, as it implies that those running the business are genuinely motivated to create shareholder value. Of course, Azure Healthcare is a very small company, with a market cap of only AU$21m. That means insiders only have AU$9.1m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!

Does Azure Healthcare Deserve A Spot On Your Watchlist?

Azure Healthcare’s earnings have taken off like any random crypto-currency did, back in 2017. 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 Azure Healthcare deserves timely attention. It is worth noting though that we have found 2 warning signs for Azure Healthcare that you need to take into consideration.

The good news is that Azure Healthcare is not the only growth stock with insider buying. Here’s a list of them… 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.

This article by Simply Wall St is general in nature. 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.

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

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