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Should You Be Adding Intact Financial (TSE:IFC) To Your Watchlist Today?

Simply Wall St

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

So if you're like me, you might be more interested in profitable, growing companies, like Intact Financial (TSE:IFC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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 Intact Financial

How Fast Is Intact Financial Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Intact Financial has grown EPS by 8.6% per year. That's a good rate of growth, if it can be sustained.

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. I note that Intact Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Intact Financial maintained stable EBIT margins over the last year, all while growing revenue 6.7% to CA$11b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

TSX:IFC Income Statement April 9th 2020
TSX:IFC Income Statement April 9th 2020

Fortunately, we've got access to analyst forecasts of Intact Financial's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Intact Financial Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CA$20b company like Intact Financial. But we are reassured by the fact they have invested in the company. Given insiders own a small fortune of shares, currently valued at CA$97m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.

Is Intact Financial Worth Keeping An Eye On?

One important encouraging feature of Intact Financial is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I'd consider keeping the company on a watchlist. Of course, identifying quality businesses is only half the battle; investors need to know whether the stock is undervalued. So you might want to consider this free discounted cashflow valuation of Intact Financial.

Although Intact Financial certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.