Do iFabric's (TSE:IFA) Earnings Warrant Your Attention?
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. 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 iFabric (TSE:IFA), which has not only revenues, but also profits. While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.
Check out our latest analysis for iFabric
How Fast Is iFabric Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That makes EPS growth an attractive quality for any company. iFabric managed to grow EPS by 11% per year, over three years. That's a pretty good rate, if the company can sustain it.
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. iFabric maintained stable EBIT margins over the last year, all while growing revenue 28% to CA$23m. That's progress.
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 iFabric is no giant, with a market capitalisation of CA$47m, you should definitely check its cash and debt before getting too excited about its prospects.
Are iFabric 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. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
In the last twelve months iFabric insiders spent CA$27k on stock; good news for shareholders. While this investment may be modest, it is great considering the lack of insider selling. It is also worth noting that it was Independent Non-Executive Director Richard Macary who made the biggest single purchase, worth CA$7.9k, paying CA$0.81 per share.
And the insider buying isn't the only sign of alignment between shareholders and the board, since iFabric insiders own more than a third of the company. To be exact, company insiders hold 66% of the company, so their decisions have a significant impact on their investments. This makes it apparent they will be incentivised to plan for the long term - a positive for shareholders with a sit and hold strategy. In terms of absolute value, insiders have CA$31m invested in the business, at the current share price. So there's plenty there to keep them focused!
Does iFabric Deserve A Spot On Your Watchlist?
One positive for iFabric is that it is growing EPS. That's nice to see. On top of that, we've seen insiders buying shares even though they already own plenty. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. We should say that we've discovered 2 warning signs for iFabric that you should be aware of before investing here.
Keen growth investors love to see insider buying. Thankfully, iFabric 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.
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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