We Ran A Stock Scan For Earnings Growth And Whitecap Resources (TSE:WCP) Passed With Ease
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Whitecap Resources (TSE:WCP). 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.
Check out our latest analysis for Whitecap Resources
How Fast Is Whitecap Resources Growing Its Earnings Per Share?
In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So a growing EPS generally brings attention to a company in the eyes of prospective investors. It's an outstanding feat for Whitecap Resources to have grown EPS from CA$0.79 to CA$4.54 in just one year. While it's difficult to sustain growth at that level, it bodes well for the company's outlook for the future. But the key is discerning whether something profound has changed, or if this is a just a one-off boost.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of Whitecap Resources shareholders is that EBIT margins have grown from 49% to 113% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.
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.
You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Whitecap Resources' future profits.
Are Whitecap Resources 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
We do note that, in the last year, insiders sold CA$3.2m worth of shares. But that's far less than the CA$5.4m insiders spent purchasing stock. This bodes well for Whitecap Resources as it highlights the fact that those who are important to the company having a lot of faith in its future. We also note that it was the Independent Director, Daryl Gilbert, who made the biggest single acquisition, paying CA$582k for shares at about CA$8.41 each.
On top of the insider buying, it's good to see that Whitecap Resources insiders have a valuable investment in the business. Holding CA$69m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.
Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. The cherry on top is that the CEO, Grant Fagerheim is paid comparatively modestly to CEOs at similar sized companies. Our analysis has discovered that the median total compensation for the CEOs of companies like Whitecap Resources with market caps between CA$2.6b and CA$8.2b is about CA$4.5m.
Whitecap Resources offered total compensation worth CA$3.4m to its CEO in the year to December 2021. That is actually below the median for CEO's of similarly sized companies. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.
Is Whitecap Resources Worth Keeping An Eye On?
Whitecap Resources' earnings per share growth have been climbing higher at an appreciable rate. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Whitecap Resources deserves timely attention. You should always think about risks though. Case in point, we've spotted 1 warning sign for Whitecap Resources you should be aware of.
Keen growth investors love to see insider buying. Thankfully, Whitecap Resources 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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