Yahoo Finance Here's Why I Think Manulife Financial (TSE:MFC) Is An Interesting Stock
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 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.
So if you're like me, you might be more interested in profitable, growing companies, like Manulife Financial (TSE:MFC). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
Check out our latest analysis for Manulife Financial
How Quickly Is Manulife Financial Increasing Earnings Per Share?
If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. Who among us would not applaud Manulife Financial's stratospheric annual EPS growth of 44%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.
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. Not all of Manulife Financial'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. Manulife Financial reported flat revenue and EBIT margins over the last year. That's not a major concern but nor does it point to the long term growth we like to see.
In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Manulife Financial's forecast profits?
Are Manulife Financial Insiders Aligned With All Shareholders?
Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.
In twelve months, insiders sold -CA$112k worth of Manulife Financial shares. But the silver lining to that cloud is that Nicole Arnaboldi, the , spent CA$142k buying shares at an average price of CA$21.82. And that's a reason to be optimistic.
The good news, alongside the insider buying, for Manulife Financial bulls is that insiders (collectively) have a meaningful investment in the stock. Indeed, they hold CA$27m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.05% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.
Should You Add Manulife Financial To Your Watchlist?
Manulife Financial's earnings per share have taken off like a rocket aimed right at the moon. The incing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. Because of the potential that it has reached an inflection point, I'd suggest Manulife Financial belongs on the top of your watchlist. Still, you should learn about the 2 warning signs we've spotted with Manulife Financial (including 1 which doesn't sit too well with us) .
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Manulife Financial, 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.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
