Here's Why We Think PPC (JSE:PPC) 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 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 are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
In contrast to all that, many investors prefer to focus on companies like PPC (JSE:PPC), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.
PPC's Improving Profits
PPC has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. In impressive fashion, PPC's EPS grew from R0.32 to R0.54, over the previous 12 months. Year on year growth of 71% is certainly a sight to behold.
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. The good news is that PPC is growing revenues, and EBIT margins improved by 4.4 percentage points to 14%, over the last year. 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. For finer detail, click on the image.
Check out our latest analysis for PPC
While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check PPC's balance sheet strength, before getting too excited.
Are PPC Insiders Aligned With All Shareholders?
Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
One shining light for PPC is the serious outlay one insider has made to buy shares, in the last year. In one big hit, CEO & Executive Director S. Cardarelli paid R58m, for shares at an average price of R7.45 per share. It doesn't get much better than that, in terms of large investments from insiders.
Does PPC Deserve A Spot On Your Watchlist?
PPC's earnings per share growth have been climbing higher at an appreciable rate. Growth investors should find it difficult to look past that strong EPS move. And may very well signal a significant inflection point for the business. If this these factors intrigue you, then an addition of PPC to your watchlist won't go amiss. Now, you could try to make up your mind on PPC by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.
There are plenty of other companies that have insiders buying up shares. So if you like the sound of PPC, you'll probably love this curated collection of companies in ZA that have an attractive valuation alongside insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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