Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, ‘If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.’ When they buy such story stocks, investors are all too often the patsy.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Stifel Financial (NYSE:SF). Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
How Fast Is Stifel Financial Growing Its Earnings Per Share?
Over the last three years, Stifel Financial has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don’t think the percent growth rate is particularly meaningful. As a result, I’ll zoom in on growth over the last year, instead. It’s good to see that Stifel Financial’s EPS have grown from US$5.36 to US$5.99 over twelve months. I doubt many would complain about that 12% gain. It also seems the company is in good financial health, since it has boosted EPS by buying back shares.
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. I note that Stifel Financial’s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. While we note Stifel Financial’s EBIT margins were flat over the last year, revenue grew by a solid 9.1% to US$3.3b. That’s progress.
You can take a look at the company’s revenue and earnings growth trend, in the chart below. For finer detail, click on the image.
Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Stifel Financial.
Are Stifel Financial Insiders Aligned With All Shareholders?
It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. So it is good to see that Stifel Financial insiders have a significant amount of capital invested in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$173m. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!
Should You Add Stifel Financial To Your Watchlist?
One positive for Stifel Financial is that it is growing EPS. That’s nice to see. If that’s not enough on its own, there is also the rather notable levels of insider ownership. The combination sparks joy for me, so I’d consider keeping the company on a watchlist. Of course, just because Stifel Financial is growing does not mean it is undervalued. If you’re wondering about the valuation, check out this gauge of its price-to-earnings ratio, as compared to its industry.
Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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