Should You Be Adding Wajax (TSE:WJX) To Your Watchlist Today?
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. 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.
In contrast to all that, many investors prefer to focus on companies like Wajax (TSE:WJX), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.
See our latest analysis for Wajax
How Fast Is Wajax Growing?
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. It certainly is nice to see that Wajax has managed to grow EPS by 30% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.
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. Wajax maintained stable EBIT margins over the last year, all while growing revenue 20% to CA$2.1b. That's a real positive.
You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.
Fortunately, we've got access to analyst forecasts of Wajax's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Wajax 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
The good news for Wajax shareholders is that no insiders reported selling shares in the last year. Add in the fact that A. Craighead, the Independent Director of the company, paid CA$38k for shares at around CA$25.48 each. It seems that at least one insider is prepared to show the market there is potential within Wajax.
Should You Add Wajax To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Wajax's strong EPS growth. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. In essence, your time will not be wasted checking out Wajax in more detail. However, before you get too excited we've discovered 3 warning signs for Wajax (2 can't be ignored!) that you should be aware of.
Keen growth investors love to see insider buying. Thankfully, Wajax isn't the only one. You can see a a free list of them here.
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.
