Does Champion Iron (ASX:CIA) Deserve A Spot On Your Watchlist?

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 currently lacks a track record of revenue and profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

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

Check out our latest analysis for Champion Iron

How Fast Is Champion Iron Growing Its Earnings Per Share?

In the last three years Champion Iron's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Champion Iron has grown its trailing twelve month EPS from CA$0.97 to CA$1.01, in the last year. That's a modest gain of 4.2%.

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. While we note Champion Iron achieved similar EBIT margins to last year, revenue grew by a solid 14% to CA$1.5b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. 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 Champion Iron's future profits.

Are Champion Iron Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. 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.

Not only did Champion Iron insiders refrain from selling stock during the year, but they also spent CA$269k buying it. That paints the company in a nice light, as it signals that its leaders are feeling confident in where the company is heading. We also note that it was the Senior Vice President of Corporate Development & Capital Markets, Michael Marcotte, who made the biggest single acquisition, paying AU$96k for shares at about AU$7.81 each.

The good news, alongside the insider buying, for Champion Iron bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth CA$360m. That equates to 13% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Does Champion Iron Deserve A Spot On Your Watchlist?

One positive for Champion Iron is that it is growing EPS. That's nice to see. In addition, insiders have been busy adding to their sizeable holdings in the company. These factors alone make the company an interesting prospect for your watchlist, as well as continuing research. What about risks? Every company has them, and we've spotted 5 warning signs for Champion Iron (of which 2 shouldn't be ignored!) you should know about.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Champion Iron, you'll probably love this free list of growing companies that insiders are buying.

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.