Do Love Group Global’s (ASX:LVE) Earnings Warrant Your Attention?

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. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Love Group Global (ASX:LVE). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.

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Love Group Global has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn’t be a fair assessment of the company’s future. As a result, we’ll zoom in on growth over the last year, instead. Love Group Global’s EPS skyrocketed from AU$0.015 to AU$0.021, in just one year; a result that’s bound to bring a smile to shareholders. That’s a fantastic gain of 39%.

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. We note that while EBIT margins have improved from 11% to 18%, the company has actually reported a fall in revenue by 5.4%. That falls short of ideal.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

See our latest analysis for Love Group Global

Since Love Group Global is no giant, with a market capitalisation of AU$5.3m, you should definitely check its cash and debt before getting too excited about its prospects.

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. That’s because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don’t always get it right.