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It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.
In contrast to all that, I prefer to spend time on companies like Abcourt Mines (CVE:ABI), which has not only revenues, but also profits. Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Abcourt Mines's Improving Profits
In the last three years Abcourt Mines's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Abcourt Mines boosted its trailing twelve month EPS from CA$0.0083 to CA$0.0097, in the last year. That's a 16% gain; respectable growth in the broader scheme of things.
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. I note that Abcourt Mines's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Abcourt Mines shareholders can take confidence from the fact that EBIT margins are up from 11% to 19%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.
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.
Since Abcourt Mines is no giant, with a market capitalization of CA$17m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are Abcourt Mines Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Not only did Abcourt Mines insiders refrain from selling stock during the year, but they also spent CA$101k buying it. That puts the company in a nice light, as it makes me think its leaders are feeling confident. We also note that it was the President, Renaud Hinse, who made the biggest single acquisition, paying CA$35k for shares at about CA$0.07 each.
Does Abcourt Mines Deserve A Spot On Your Watchlist?
One important encouraging feature of Abcourt Mines is that it is growing profits. While some companies are struggling to grow EPS, Abcourt Mines seems free from that morose affliction. The cherry on top is the insider share purchases, which provide an extra impetus to keep and eye on this stock, at the very least. Now, you could try to make up your mind on Abcourt Mines by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
The good news is that Abcourt Mines is not the only growth stock with insider buying. Here's a a list of them... with insider buying in the last three months!
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.