Here's Why We Think IPD Group (ASX:IPG) Might Deserve Your Attention Today

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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like IPD Group (ASX:IPG). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide IPD Group with the means to add long-term value to shareholders.

See our latest analysis for IPD Group

IPD Group's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Over the last year, IPD Group increased its EPS from AU$0.14 to AU$0.16. That's a modest gain of 8.4%.

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. While we note IPD Group achieved similar EBIT margins to last year, revenue grew by a solid 28% to AU$227m. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for IPD Group?

Are IPD Group Insiders Aligned With All Shareholders?

It's pleasing to see company leaders with putting their money on the line, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. Shareholders will be pleased by the fact that insiders own IPD Group shares worth a considerable sum. Given insiders own a significant chunk of shares, currently valued at AU$149m, they have plenty of motivation to push the business to succeed. That holding amounts to 30% of the stock on issue, thus making insiders influential owners of the business and aligned with the interests of shareholders.

While it's always good to see some strong conviction in the company from insiders through heavy investment, it's also important for shareholders to ask if management compensation policies are reasonable. Well, based on the CEO pay, you'd argue that they are indeed. The median total compensation for CEOs of companies similar in size to IPD Group, with market caps between AU$303m and AU$1.2b, is around AU$1.3m.

The IPD Group CEO received AU$975k in compensation for the year ending June 2023. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Is IPD Group Worth Keeping An Eye On?

One positive for IPD Group is that it is growing EPS. That's nice to see. The growth of EPS may be the eye-catching headline for IPD Group, but there's more to bring joy for shareholders. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Even so, be aware that IPD Group is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Although IPD Group certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with insider buying, then check out this handpicked selection of Australian companies that not only boast of strong growth but have also seen recent insider buying..

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.