We Ran A Stock Scan For Earnings Growth And Purple Group (JSE:PPE) Passed With Ease

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. 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 Purple Group (JSE:PPE). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Purple Group with the means to add long-term value to shareholders.

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How Fast Is Purple Group Growing?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Purple Group has grown EPS by 5.0% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Our analysis has highlighted that Purple Group's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Purple Group maintained stable EBIT margins over the last year, all while growing revenue 22% to R485m. That's encouraging news for the company!

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

Check out our latest analysis for Purple Group

Since Purple Group is no giant, with a market capitalisation of R3.3b, you should definitely check its cash and debt before getting too excited about its prospects.

Are Purple Group Insiders Aligned With All Shareholders?

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. Because often, 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.

We haven't seen any insiders selling Purple Group shares, in the last year. So it's definitely nice that Group CEO & Executive Director Charles Savage bought R508k worth of shares at an average price of around R1.05. It seems that at least one insider is prepared to show the market there is potential within Purple Group.

The good news, alongside the insider buying, for Purple Group bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold R452m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 14% of the shares on issue for the business, an appreciable amount considering the market cap.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Purple Group's CEO, Charles Savage, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between R1.7b and R6.7b, like Purple Group, the median CEO pay is around R13m.

The Purple Group CEO received R6.8m in compensation for the year ending August 2025. That seems pretty reasonable, especially given it's below the median for similar sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Purple Group Deserve A Spot On Your Watchlist?

As previously touched on, Purple Group is a growing business, which is encouraging. Better yet, insiders are significant shareholders, and have been buying more shares. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. One of Buffett's considerations when discussing businesses is if they are capital light or capital intensive. Generally, a company with a high return on equity is capital light, and can thus fund growth more easily. So you might want to check this graph comparing Purple Group's ROE with industry peers (and the market at large).

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Purple Group, you'll probably love this curated collection of companies in ZA that have an attractive valuation alongside 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.