Yahoo Finance Here's Why I Think ECN Capital (TSE:ECN) Might Deserve Your Attention Today
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. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in ECN Capital (TSE:ECN). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.
View our latest analysis for ECN Capital
How Fast Is ECN Capital Growing Its Earnings Per Share?
In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like the hint of a smile on a face that I love, growing EPS generally makes me look twice. It is therefore awe-striking that ECN Capital's EPS went from US$0.0045 to US$0.027 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company.
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. Not all of ECN Capital's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note ECN Capital's EBIT margins were flat over the last year, revenue grew by a solid 9.0% to US$244m. That's a real positive.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
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 ECN Capital's future profits.
Are ECN Capital 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.
While ECN Capital insiders did net -US$2.6m selling stock over the last year, they invested US$3.4m, a much higher figure. On balance, to me, this signals their optimism. It is also worth noting that it was Senior VP Mary Koenig who made the biggest single purchase, worth CA$2.3m, paying CA$4.24 per share.
On top of the insider buying, it's good to see that ECN Capital insiders have a valuable investment in the business. Notably, they have an enormous stake in the company, worth US$148m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Is ECN Capital Worth Keeping An Eye On?
ECN Capital's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. Just as heartening; insiders both own and are buying more stock. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe ECN Capital deserves timely attention. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with ECN Capital (at least 1 which is significant) , and understanding them should be part of your investment process.
As a growth investor I do like to see insider buying. But ECN Capital 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.
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. 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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