We Ran A Stock Scan For Earnings Growth And Seplat Energy (LON:SEPL) Passed With Ease

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Seplat Energy (LON:SEPL). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Seplat Energy with the means to add long-term value to shareholders.

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Seplat Energy's Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. We can see that in the last three years Seplat Energy grew its EPS by 9.9% per year. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. On the revenue front, Seplat Energy has done well over the past year, growing revenue by 167% to US$2.6b but EBIT margin figures were less stellar, seeing a decline over the last 12 months. If EBIT margins are able to stay balanced and this revenue growth continues, then we should see brighter days ahead.

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.

View our latest analysis for Seplat Energy

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 Seplat Energy's future profits.

Are Seplat Energy Insiders Aligned With All Shareholders?

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.

With strong conviction, Seplat Energy insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the company insider, Babs Omotowa, paid US$68k to buy shares at an average price of US$1.78. Purchases like this clue us in to the to the faith management has in the business' future.

On top of the insider buying, it's good to see that Seplat Energy insiders have a valuable investment in the business. To be specific, they have US$13m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 0.9% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Seplat Energy Worth Keeping An Eye On?

One important encouraging feature of Seplat Energy is that it is growing profits. 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. You should always think about risks though. Case in point, we've spotted 2 warning signs for Seplat Energy you should be aware of, and 1 of them makes us a bit uncomfortable.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Seplat Energy, you'll probably love this curated collection of companies in GB that have an attractive valuation alongside 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.