Yahoo Finance Is Now The Time To Put Element Fleet Management (TSE:EFN) On Your Watchlist?
Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.
Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Element Fleet Management (TSE:EFN). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Element Fleet Management with the means to add long-term value to shareholders.
View our latest analysis for Element Fleet Management
Element Fleet Management's Improving Profits
Over the last three years, Element Fleet Management has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. As a result, we'll zoom in on growth over the last year, instead. Element Fleet Management's EPS shot up from CA$0.76 to CA$0.97; a result that's bound to keep shareholders happy. That's a fantastic gain of 27%.
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 Element Fleet Management's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. While we note Element Fleet Management achieved similar EBIT margins to last year, revenue grew by a solid 15% to CA$1.7b. That's a real positive.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Element Fleet Management's forecast profits?
Are Element Fleet Management Insiders Aligned With All Shareholders?
Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.
The real kicker here is that Element Fleet Management insiders spent a staggering CA$3.5m on acquiring shares in just one year, without single share being sold in the meantime. The shareholders within the general public should find themselves expectant and certainly hopeful, that this large outlay signals prescient optimism for the business. Zooming in, we can see that the biggest insider purchase was by CEO & Executive Director Jay Forbes for CA$1.8m worth of shares, at about CA$18.50 per share.
Along with the insider buying, another encouraging sign for Element Fleet Management is that insiders, as a group, have a considerable shareholding. Indeed, they hold CA$17m worth of its stock. This considerable investment should help drive long-term value in the business. While their ownership only accounts for 0.2%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.
Does Element Fleet Management Deserve A Spot On Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Element Fleet Management's strong EPS growth. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. We should say that we've discovered 2 warning signs for Element Fleet Management (1 doesn't sit too well with us!) that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of Element Fleet Management, 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.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
