Yahoo Finance Should You Be Adding Goodfellow (TSE:GDL) To Your Watchlist Today?
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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' 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.
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 Goodfellow (TSE:GDL). 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.
View our latest analysis for Goodfellow
Goodfellow's Improving Profits
In the last three years Goodfellow's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. So it would be better to isolate the growth rate over the last year for our analysis. It's good to see that Goodfellow's EPS has grown from CA$3.92 to CA$4.47 over twelve months. There's little doubt shareholders would be happy with that 14% gain.
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. While we note Goodfellow achieved similar EBIT margins to last year, revenue grew by a solid 4.9% to CA$625m. That's encouraging news for the company!
In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.
Goodfellow isn't a huge company, given its market capitalisation of CA$135m. That makes it extra important to check on its balance sheet strength.
Are Goodfellow 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
Belief in the company remains high for insiders as there hasn't been a single share sold by the management or company board members. But more importantly, President & CEO Patrick Goodfellow spent CA$158k acquiring shares, doing so at an average price of CA$10.52. Purchases like this clue us in to the to the faith management has in the business' future.
On top of the insider buying, it's good to see that Goodfellow insiders have a valuable investment in the business. To be specific, they have CA$18m worth of shares. This considerable investment should help drive long-term value in the business. As a percentage, this totals to 14% of the shares on issue for the business, an appreciable amount considering the market cap.
Is Goodfellow Worth Keeping An Eye On?
As previously touched on, Goodfellow is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. That makes the company a prime candidate for your watchlist - and arguably a research priority. Still, you should learn about the 1 warning sign we've spotted with Goodfellow.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Goodfellow, 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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