Is Now The Time To Put Argo Blockchain (LON:ARB) On Your Watchlist?

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 the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Argo Blockchain (LON:ARB). While profit is not necessarily a social good, it’s easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Argo Blockchain

Argo Blockchain’s Improving Profits

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 Argo Blockchain grew its EPS from UK£0.0048 to UK£0.066, in one short year. When you see earnings grow that quickly, it often means good things ahead for the company. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. The good news is that Argo Blockchain is growing revenues, and EBIT margins improved by 46.9 percentage points to 58%, over the last year. That’s great to see, on both counts.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

LSE:ARB Earnings and Revenue History May 10th 2022

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 Argo Blockchain’s future profits.

Are Argo Blockchain Insiders Aligned With All Shareholders?

Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, 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.

Like a sturdy phalanx Argo Blockchain insiders have stood united by refusing to sell shares over the last year. But the bigger deal is that the Independent Non-Executive Director, Sarah Gow, paid UK£53k to buy shares at an average price of UK£1.32.

I do like that insiders have been buying shares in Argo Blockchain, but there is more evidence of shareholder friendly management. I refer to the very reasonable level of CEO pay. For companies with market capitalizations between UK£162m and UK£650m, like Argo Blockchain, the median CEO pay is around UK£809k.

The CEO of Argo Blockchain only received UK£241k in total compensation for the year ending . That looks like modest pay to me, and may hint at a certain respect for the interests of shareholders. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. I’d also argue reasonable pay levels attest to good decision making more generally.

Does Argo Blockchain Deserve A Spot On Your Watchlist?

Argo Blockchain’s earnings per share have taken off like a rocket aimed right at the moon. The company can also boast of insider buying, and reasonable remuneration for the CEO. The strong EPS growth suggests Argo Blockchain may be at an inflection point. If so, then it the potential for further gains probably merit a spot on your watchlist. It’s still necessary to consider the ever-present spectre of investment risk. We’ve identified 3 warning signs with Argo Blockchain (at least 1 which shouldn’t be ignored) , and understanding them should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Argo Blockchain, you’ll probably love this free list of growing companies that insiders are buying.

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. 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.