Yahoo Finance Here's Why I Think Empire (TSE:EMP.A) Might Deserve Your Attention Today
Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'
In contrast to all that, I prefer to spend time on companies like Empire (TSE:EMP.A), which has not only revenues, but also profits. While profit is not necessarily a social good, it's easy to admire a business that 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.
See our latest analysis for Empire
How Fast Is Empire Growing Its Earnings Per Share?
In the last three years Empire'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. As a result, I'll zoom in on growth over the last year, instead. Like a falcon taking flight, Empire's EPS soared from CA$1.42 to CA$2.16, over the last year. That's a commendable gain of 52%.
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. While we note Empire's EBIT margins were flat over the last year, revenue grew by a solid 5.7% to CA$27b. That's progress.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
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 Empire's future profits.
Are Empire Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
Any way you look at it Empire shareholders can gain quiet confidence from the fact that insiders shelled out CA$467k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. Zooming in, we can see that the biggest insider purchase was by Independent Director Paul Sobey for CA$314k worth of shares, at about CA$31.35 per share.
The good news, alongside the insider buying, for Empire bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold CA$58m worth of its stock. That's a lot of money, and no small incentive to work hard. Even though that's only about 0.7% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Does Empire Deserve A Spot On Your Watchlist?
For growth investors like me, Empire's raw rate of earnings growth is a beacon in the night. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. However, before you get too excited we've discovered 1 warning sign for Empire that you should be aware of.
As a growth investor I do like to see insider buying. But Empire 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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