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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.
In contrast to all that, many investors prefer to focus on companies like Canaf Investments (CVE:CAF), which has not only revenues, but also profits. Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Canaf Investments with the means to add long-term value to shareholders.
Canaf Investments’ Earnings Per Share Are Growing
Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Shareholders will be happy to know that Canaf Investments’ EPS has grown 25% each year, compound, over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.
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. Canaf Investments maintained stable EBIT margins over the last year, all while growing revenue 21% to US$17m. That’s a real positive.
In the chart below, you can see how the company has grown earnings and revenue, over time. Click on the chart to see the exact numbers.
Since Canaf Investments is no giant, with a market capitalisation of CA$5.2m, you should definitely check its cash and debt before getting too excited about its prospects.
Are Canaf Investments Insiders Aligned With All Shareholders?
It’s a good habit to check into a company’s remuneration policies to ensure that the CEO and management team aren’t putting their own interests before that of the shareholder with excessive salary packages. Our analysis has discovered that the median total compensation for the CEOs of companies like Canaf Investments with market caps under US$200m is about US$173k.
Canaf Investments’ CEO took home a total compensation package worth US$151k in the year leading up to October 2021. That seems pretty reasonable, especially given it’s below the median for similar sized companies. While the level of CEO compensation shouldn’t be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.
Does Canaf Investments Deserve A Spot On Your Watchlist?
You can’t deny that Canaf Investments has grown its earnings per share at a very impressive rate. That’s attractive. The fast growth bodes well while the very reasonable CEO pay assists builds some confidence in the board. So this stock is well worth an addition to your watchlist as it has the potential to provide great value to shareholders. It is worth noting though that we have found 2 warning signs for Canaf Investments that you need to take into consideration.
Although Canaf Investments certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see insider buying, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.
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