Yahoo Finance With EPS Growth And More, Just Energy Group (TSE:JE) Is Interesting
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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.
In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Just Energy Group (TSE:JE). While profit is not necessarily a social good, it's easy to admire a business than can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
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View our latest analysis for Just Energy Group
How Fast Is Just Energy Group Growing?
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. As a tree reaches steadily for the sky, Just Energy Group's EPS has grown 19% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.
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. Just Energy Group maintained stable EBIT margins over the last year, all while growing revenue 7.2% to CA$3.8b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
Fortunately, we've got access to analyst forecasts of Just Energy Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.
Are Just Energy Group Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
Despite -CA$56.4k worth of sales, Just Energy Group insiders have overwhelmingly been buying the stock, spending CA$1.1m on purchases in the last twelve months. You could argue that level of buying implies genuine confidence in the business. It is also worth noting that it was Ronald Joyce who made the biggest single purchase, worth CA$378k, paying CA$3.78 per share.
The good news, alongside the insider buying, for Just Energy Group bulls is that insiders (collectively) have a meaningful investment in the stock. Notably, they have an enormous stake in the company, worth CA$238m. Coming in at 33% of the business, that holding gives insiders a lot of influence, and plenty of reason to generate value for shareholders. Very encouraging.
While insiders already own a significant amount of shares, and they have been buying more, the good news for ordinary shareholders does not stop there. The cherry on top is that the CEO, Pat McCullough is paid comparatively modestly to CEOs at similar sized companies. For companies with market capitalizations between CA$269m and CA$1.1b, like Just Energy Group, the median CEO pay is around CA$1.4m.
The Just Energy Group CEO received CA$967k in compensation for the year ending March 2018. That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. I'd also argue reasonable pay levels attest to good decision making more generally.
Does Just Energy Group Deserve A Spot On Your Watchlist?
Given my belief that share price follows earnings per share you can easily imagine how I feel about Just Energy Group's strong EPS growth. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Just Energy Group shapes up to industry peers, when it comes to ROE.
As a growth investor I do like to see insider buying. But Just Energy Group 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
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
