Here's Why We Think Collins Foods (ASX:CKF) 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. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

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 Collins Foods (ASX:CKF). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Collins Foods with the means to add long-term value to shareholders.

View our latest analysis for Collins Foods

How Fast Is Collins Foods 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) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. We can see that in the last three years Collins Foods grew its EPS by 12% per year. That's a good rate of growth, if it can be sustained.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. EBIT margins for Collins Foods remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 11% to AU$1.2b. 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.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Collins Foods' future profits.

Are Collins Foods Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Despite some Collins Foods insiders disposing of some shares, we note that there was AU$189k more in buying interest among those who know the company best Although some people may hesitate due to the share sales, the fact that insiders bought more than they sold, is a positive thing to note. It is also worth noting that it was MD, CEO & Director Drew O’Malley who made the biggest single purchase, worth AU$166k, paying AU$11.13 per share.

The good news, alongside the insider buying, for Collins Foods bulls is that insiders (collectively) have a meaningful investment in the stock. With a whopping AU$85m worth of shares as a group, insiders have plenty riding on the company's success. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Does Collins Foods Deserve A Spot On Your Watchlist?

One important encouraging feature of Collins Foods is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. That makes the company a prime candidate for your watchlist - and arguably a research priority. It is worth noting though that we have found 1 warning sign for Collins Foods that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Collins Foods isn't the only one. You can see a a free list of them here.

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.