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 Scales (NZSE:SCL). While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.
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. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Scales has managed to grow EPS by 26% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
It’s often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company’s growth. Scales shareholders can take confidence from the fact that EBIT margins are up from 10% to 13%, and revenue is growing. Both of which are great metrics to check off for potential growth.
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.
NZSE:SCL Earnings and Revenue History January 18th 2026
See our latest analysis for Scales
The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don’t exist, you can check our visualization of consensus analyst forecasts for Scales’ future EPS 100% free.
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, insiders are sometimes wrong, and we don’t know the exact thinking behind their acquisitions.
Insider selling of Scales shares was insignificant compared to the one buyer, over the last twelve months. Namely, Non-Executive Independent Director Miranda Burdon out-laid NZ$706k for shares, at about NZ$5.93 per share. That certainly piques our interest.
Along with the insider buying, another encouraging sign for Scales is that insiders, as a group, have a considerable shareholding. Indeed, they hold NZ$29m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Despite being just 3.4% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.
For growth investors, Scales’ raw rate of earnings growth is a beacon in the night. Moreover, the management and board of the company hold a significant stake in the company, with one party adding to this total. These things considered, this is one stock worth watching. Of course, just because Scales is growing does not mean it is undervalued. If you’re wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
The good news is that Scales is not the only stock with insider buying. Here’s a list of small cap, undervalued companies in NZ with 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.