Here's Why I Think Propel Funeral Partners (ASX:PFP) Is An Interesting Stock

It's only natural that many investors, especially those who are new to the game, prefer to buy shares in 'sexy' stocks with a good story, even if those businesses lose money. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Propel Funeral Partners (ASX:PFP). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Propel Funeral Partners

How Fast Is Propel Funeral Partners Growing Its Earnings Per Share?

Over the last three years, Propel Funeral Partners 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. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, Propel Funeral Partners's EPS soared from AU$0.094 to AU$0.16, in just one year. That's a commendable gain of 65%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Propel Funeral Partners shareholders can take confidence from the fact that EBIT margins are up from 17% to 22%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Propel Funeral Partners EPS 100% free.

Are Propel Funeral Partners Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.

Not only did Propel Funeral Partners insiders refrain from selling stock during the year, but they also spent AU$149k buying it. That's nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by Head of Mergers & Acquisitions Fraser Henderson for AU$83k worth of shares, at about AU$2.78 per share.

On top of the insider buying, it's good to see that Propel Funeral Partners insiders have a valuable investment in the business. To be specific, they have AU$27m worth of shares. That's a lot of money, and no small incentive to work hard. Those holdings account for over 8.9% of the company; visible skin in the game.

Is Propel Funeral Partners Worth Keeping An Eye On?

For growth investors like me, Propel Funeral Partners's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more, shares in the company. So I do think this is one stock worth watching. You still need to take note of risks, for example - Propel Funeral Partners has 2 warning signs we think you should be aware of.

As a growth investor I do like to see insider buying. But Propel Funeral Partners 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. 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.
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