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With EPS Growth And More, Lorne Park Capital Partners (CVE:LPC) Is Interesting

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 completely lacks a track record of revenue and profit. 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 contrast to all that, I prefer to spend time on companies like Lorne Park Capital Partners (CVE:LPC), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

See our latest analysis for Lorne Park Capital Partners

Lorne Park Capital Partners's Improving Profits

In the last three years Lorne Park Capital Partners's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. Thus, it makes sense to focus on more recent growth rates, instead. Like the last firework on New Year's Eve accelerating into the sky, Lorne Park Capital Partners's EPS shot from CA$0.018 to CA$0.045, over the last year. You don't see 154% year-on-year growth like that, very often. The best case scenario? That the business has hit a true inflection point.

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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. The good news is that Lorne Park Capital Partners is growing revenues, and EBIT margins improved by 7.1 percentage points to 14%, over the last year. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

earnings-and-revenue-history
earnings-and-revenue-history

Lorne Park Capital Partners isn't a huge company, given its market capitalization of CA$72m. That makes it extra important to check on its balance sheet strength.

Are Lorne Park Capital Partners Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So as you can imagine, the fact that Lorne Park Capital Partners insiders own a significant number of shares certainly appeals to me. In fact, they own 43% of the shares, making insiders a very influential shareholder group. I'm reassured by this kind of alignment, as it suggests the business will be run for the benefit of shareholders. In terms of absolute value, insiders have CA$31m invested in the business, using the current share price. That should be more than enough to keep them focussed on creating shareholder value!

Should You Add Lorne Park Capital Partners To Your Watchlist?

Lorne Park Capital Partners's earnings per share have taken off like a rocket aimed right at the moon. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Lorne Park Capital Partners for a spot on your watchlist. Before you take the next step you should know about the 4 warning signs for Lorne Park Capital Partners that we have uncovered.

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

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.