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.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.
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 Endeavour Group (ASX:EDV). 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.
How Fast Is Endeavour Group Growing Its Earnings Per Share?
Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's easy to see why many investors focus in on EPS growth. Endeavour Group's EPS has risen over the last 12 months, growing from AU$0.25 to AU$0.28. There's little doubt shareholders would be happy with that 12% gain.
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. It was a year of stability for Endeavour Group as both revenue and EBIT margins remained have been flat over the past year. That's not bad, but it doesn't point to ongoing future growth, either.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Endeavour Group.
Are Endeavour Group Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
The real kicker here is that Endeavour Group insiders spent a staggering AU$110m on acquiring shares in just one year, without single share being sold in the meantime. Knowing this, Endeavour Group will have have all eyes on them in anticipation for the what could happen in the near future. It is also worth noting that it was company insider Bruce Mathieson who made the biggest single purchase, worth AU$55m, paying AU$6.53 per share.
The good news, alongside the insider buying, for Endeavour Group bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth AU$1.9b. That equates to 15% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Does Endeavour Group Deserve A Spot On Your Watchlist?
As previously touched on, Endeavour Group is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Still, you should learn about the 1 warning sign we've spotted with Endeavour Group.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Endeavour 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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