Here's Why We Think Intact Financial (TSE:IFC) Might Deserve Your Attention Today
The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Intact Financial (TSE:IFC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Intact Financial with the means to add long-term value to shareholders.
Intact Financial's Improving Profits
Even when EPS earnings per share (EPS) growth is unexceptional, company value can be created if this rate is sustained each year. So it's no surprise that some investors are more inclined to invest in profitable businesses. Intact Financial's EPS shot up from CA$11.58 to CA$16.78; a result that's bound to keep shareholders happy. That's a fantastic gain of 45%.
Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Not all of Intact Financial's revenue last year was 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. Intact Financial shareholders can take confidence from the fact that EBIT margins are up from 12% to 17%, and revenue is growing. Both of which are great metrics to check off for potential growth.
The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.
See our latest analysis for Intact Financial
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Intact Financial's forecast profits?
Are Intact Financial Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a CA$49b company like Intact Financial. But we are reassured by the fact they have invested in the company. Indeed, they have a considerable amount of wealth invested in it, currently valued at CA$236m. While that is a lot of skin in the game, we note this holding only totals to 0.5% of the business, which is a result of the company being so large. This should still be a great incentive for management to maximise shareholder value.
Should You Add Intact Financial To Your Watchlist?
If you believe that share price follows earnings per share you should definitely be delving further into Intact Financial's strong EPS growth. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. On the balance of its merits, solid EPS growth and company insiders who are aligned with the shareholders would indicate a business that is worthy of further research. Even so, be aware that Intact Financial is showing 1 warning sign in our investment analysis , you should know about...
There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access a tailored list of Canadian companies which have demonstrated growth backed by significant insider holdings.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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.