With EPS Growth And More, OFX Group (ASX:OFX) Makes An Interesting Case
It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like OFX Group (ASX:OFX). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide OFX Group with the means to add long-term value to shareholders.
Check out our latest analysis for OFX Group
OFX Group's Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That means EPS growth is considered a real positive by most successful long-term investors. Impressively, OFX Group has grown EPS by 19% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.
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. EBIT margins for OFX Group remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 34% to AU$197m. That's a real positive.
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.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for OFX Group?
Are OFX 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. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
OFX Group top brass are certainly in sync, not having sold any shares, over the last year. But more importantly, CEO, MD & Executive Director John Malcolm spent AU$99k acquiring shares, doing so at an average price of AU$2.31. Purchases like this clue us in to the to the faith management has in the business' future.
Along with the insider buying, another encouraging sign for OFX Group is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at AU$27m. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 7.6% of the shares on issue for the business, an appreciable amount considering the market cap.
Does OFX Group Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into OFX Group's strong EPS growth. Better still, insiders own a large chunk of the company and one has even been buying more shares. Astute investors will want to keep this stock on watch. You should always think about risks though. Case in point, we've spotted 1 warning sign for OFX Group you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of OFX Group, you'll probably love this free list of growing companies that insiders are 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.
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