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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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like Power Financial (TSE:PWF), 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. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.
How Fast Is Power Financial 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 EPS growth can certainly encourage an investor to take note of a stock. It's good to see that Power Financial's EPS have grown from CA$2.55 to CA$3.07 over twelve months. I doubt many would complain about that 21% gain.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. I note that Power Financial's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Power Financial's EBIT margins were flat over the last year, revenue grew by a solid 16% to CA$54b. That's progress.
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.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Power Financial?
Are Power Financial Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.
First things first; I didn't see insiders sell Power Financial shares in the last year. Even better, though, is that the , Pierre Beaudoin, bought a whopping CA$498k worth of shares, paying about CA$28.46 per share, on average. To me that means at least one insider thinks that the company is doing well - and they are backing that view with cash.
Should You Add Power Financial To Your Watchlist?
As I already mentioned, Power Financial is a growing business, which is what I like to see. While some companies are struggling to grow EPS, Power Financial seems free from that morose affliction. The icing on the cake is that an insider bought shares during the year, which inclines me to put this one on a watchlist. Once you've identified a business you like, the next step is to consider what you think it's worth. And right now is your chance to view our exclusive discounted cashflow valuation of Power Financial. You might benefit from giving it a glance today.
As a growth investor I do like to see insider buying. But Power Financial 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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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.