Should You Be Adding ADF Group (TSE:DRX) To Your Watchlist Today?
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in ADF Group (TSE:DRX). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
Check out our latest analysis for ADF Group
ADF Group's Improving Profits
Over the last three years, ADF Group has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. Thus, it makes sense to focus on more recent growth rates, instead. Impressively, ADF Group's EPS catapulted from CA$0.41 to CA$0.90, over the last year. It's not often a company can achieve year-on-year growth of 119%.
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. The music to the ears of ADF Group shareholders is that EBIT margins have grown from 6.5% to 14% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.
ADF Group isn't a huge company, given its market capitalisation of CA$336m. That makes it extra important to check on its balance sheet strength.
Are ADF Group Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. 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.
With strong conviction, ADF Group insiders have stood united by refusing to sell shares over the last year. But the real excitement comes from the CA$100k that Independent Director Jean Rochette spent buying shares (at an average price of about CA$5.00). Purchases like this clue us in to the to the faith management has in the business' future.
On top of the insider buying, it's good to see that ADF Group insiders have a valuable investment in the business. With a whopping CA$99m worth of shares as a group, insiders have plenty riding on the company's success. Amounting to 29% of the outstanding shares, indicating that insiders are also significantly impacted by the decisions they make on the behalf of the business.
Does ADF Group Deserve A Spot On Your Watchlist?
ADF Group's earnings per share have been soaring, with growth rates sky high. The cherry on top is that insiders own a bunch of shares, and one has been buying more. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe ADF Group deserves timely attention. Now, you could try to make up your mind on ADF Group by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
Keen growth investors love to see insider buying. Thankfully, ADF Group isn't the only one. You can see a a curated list of Canadian companies which have exhibited consistent growth accompanied by 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.
