Yahoo Finance Is Now The Time To Put CF Energy (CVE:CFY) On Your Watchlist?
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.
So if you're like me, you might be more interested in profitable, growing companies, like CF Energy (CVE:CFY). 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.
Check out our latest analysis for CF Energy
How Quickly Is CF Energy Increasing Earnings Per Share?
The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, CF Energy has grown EPS by 7.3% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. CF Energy maintained stable EBIT margins over the last year, all while growing revenue 6.8% to CN¥394m. 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.
Since CF Energy is no giant, with a market capitalization of CA$30m, so you should definitely check its cash and debt before getting too excited about its prospects.
Are CF Energy 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.
We haven't seen any insiders selling CF Energy shares, in the last year. With that in mind, it's heartening that Yongbiao Ding, the Independent Director of the company, paid CN¥30k for shares at around CN¥0.44 each.
On top of the insider buying, we can also see that CF Energy insiders own a large chunk of the company. Indeed, with a collective holding of 55%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only CA$30m CF Energy is really small for a listed company. That means insiders only have CN¥16m worth of shares, despite the large proportional holding. That might not be a huge sum but it should be enough to keep insiders motivated!
Does CF Energy Deserve A Spot On Your Watchlist?
One important encouraging feature of CF Energy is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. However, before you get too excited we've discovered 3 warning signs for CF Energy (2 don't sit too well with us!) that you should be aware of.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of CF Energy, 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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
