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. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.
So if you’re like me, you might be more interested in profitable, growing companies, like Quebecor (TSE:QBR.B). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.
How Fast Is Quebecor Growing?
If you believe that markets are even vaguely efficient, then over the long term you’d expect a company’s share price to follow its earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Quebecor has grown EPS by 58% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.
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. Quebecor maintained stable EBIT margins over the last year, all while growing revenue 2.4% to CA$4.2b. That’s progress.
While we live in the present moment at all times, there’s no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Quebecor?
Are Quebecor Insiders Aligned With All Shareholders?
We would not expect to see insiders owning a large percentage of a CA$7.6b company like Quebecor. But we do take comfort from the fact that they are investors in the company. To be specific, they have CA$63m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that’s only about 0.8% of the company, it’s enough money to indicate alignment between the leaders of the business and ordinary shareholders.
It means a lot to see insiders invested in the business, but I find myself wondering if remuneration policies are shareholder friendly. A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between CA$5.3b and CA$16b, like Quebecor, the median CEO pay is around CA$5.4m.
The CEO of Quebecor only received CA$2.6m in total compensation for the year ending December 2018. That’s clearly well below average, so at a glance, that arrangement seems generous to shareholders, and points to a modest remuneration culture. While the level of CEO compensation isn’t a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.
Should You Add Quebecor To Your Watchlist?
Quebecor’s earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. The sweetener is that insiders have a mountain of stock, and the CEO remuneration is quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so I do think Quebecor is worth considering carefully. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Quebecor is trading on a high P/E or a low P/E, relative to its industry.
Although Quebecor certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, 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
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