I ran stock analysis for earnings growth and Newgen Software Technologies (NSE:NEWGEN) passed with ease
Like a puppy chasing its tail, some new investors are often looking for “the next big thing,” even if that means buying “history stocks” with no revenue, let alone profit. But as Warren Buffett said, “If you’ve been playing poker for half an hour and you still don’t know who the sucker is, you’re the sucker.” When buying such stocks, investors are too often suckers.
In the era of blue-sky tech-stock investments, my choice may seem old-fashioned; I always prefer profitable companies like Next generation software technologies (NSE: NEWGEN). Although profit is not necessarily a social good, it is easy to admire a company that can produce it consistently. In comparison, loss-making companies act like a sponge for capital – but unlike such a sponge, they don’t always produce something when pressed.
See our latest analysis for Newgen Software Technologies
How fast is Newgen Software Technologies growing earnings per share?
If a company can keep increasing its earnings per share (EPS) long enough, its stock price will eventually follow. So it’s no surprise that I like investing in EPS growth companies. Newgen Software Technologies succeeded in growing EPS by 16% per year, over three years. That’s a good growth rate, if it can be sustained.
A careful look at revenue growth and earnings before interest and tax (EBIT) margins can help inform a view on the sustainability of recent earnings growth. On the one hand, Newgen Software Technologies’ EBIT margins have fallen over the past year, but on the other hand, revenues have increased. So if EBIT margins can stabilize, this top line growth should pay off for shareholders.
In the table below, you can see how the company has increased its profits and revenue over time. Click on the table to see the exact numbers.
You don’t drive with your eyes on the rearview mirror, so you might be more interested in that free report showing analyst forecasts for Newgen Software Technologies future profits.
Are Newgen Software Technologies insiders aligned with all shareholders?
Personally, I like to see high insider ownership in a company, as it suggests that it will be run in the interests of shareholders. We are therefore delighted to report that Newgen Software Technologies insiders own a significant share of the company. Indeed, they own 59% of the company, so they will share the same delights and challenges experienced by ordinary shareholders. To me, this is a good sign as it suggests that they will be incentivized to create long-term shareholder value. And their stake is extremely valuable at the current share price, totaling ₹16 billion. That’s what I call serious skin in the game!
Do Newgen software technologies deserve a spot on your watchlist?
A positive point for Newgen Software Technologies is that it develops EPS. It’s nice to see. If that’s not enough on its own, there are also the fairly notable levels of insider ownership. The combination sparks joy for me, so I would consider keeping the company on a watch list. We don’t want to rain too much on the parade, but we also found 2 warning signs for Newgen Software Technologies which you must take into account.
Of course, you can (sometimes) buy stocks that are not increased income and do not have insiders buying stocks. But as a growth investor, I always like to check out companies that To do have these characteristics. You can access a free list of them here.
Please note that insider trading discussed in this article refers to reportable trading in the relevant jurisdiction.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.