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 Prime Financial Group (ASX:PFG). 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 Prime Financial Group Growing Its Earnings Per Share?
Over the last three years, Prime Financial Group 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. Like a falcon taking flight, Prime Financial Group's EPS soared from AU$0.012 to AU$0.016, over the last year. That's a commendable gain of 34%.
I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. The good news is that Prime Financial Group is growing revenues, and EBIT margins improved by 4.8 percentage points to 24%, over the last year. Ticking those two boxes is a good sign of growth, in my book.
In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.
Prime Financial Group isn't a huge company, given its market capitalization of AU$32m. That makes it extra important to check on its balance sheet strength.
Are Prime Financial Group Insiders Aligned With All Shareholders?
Like standing at the lookout, surveying the horizon at sunrise, insider buying, for some investors, sparks joy. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.
We haven't seen any insiders selling Prime Financial Group shares, in the last year. With that in mind, it's heartening that Brett Gorman, the of the company, paid AU$51k for shares at around AU$0.14 each.
Does Prime Financial Group Deserve A Spot On Your Watchlist?
For growth investors like me, Prime Financial Group's raw rate of earnings growth is a beacon in the night. Not only is that growth rate rather juicy, but the insider buying makes my mouth water. So on this analysis I believe Prime Financial Group is probably worth spending some time on. What about risks? Every company has them, and we've spotted 4 warning signs for Prime Financial Group you should know about.
As a growth investor I do like to see insider buying. But Prime Financial Group 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.
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.
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