Stock Analysis

Here's Why I Think Bapcor (ASX:BAP) Might Deserve Your Attention Today

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ASX:BAP
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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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Bapcor (ASX:BAP). 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 Bapcor

How Fast Is Bapcor Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Over the last three years, Bapcor has grown EPS by 4.9% per year. That might not be particularly high growth, but it does show that per-share earnings are moving steadily in the right direction.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Bapcor maintained stable EBIT margins over the last year, all while growing revenue 20% to AU$1.8b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
ASX:BAP Earnings and Revenue History August 20th 2021

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 Bapcor EPS 100% free.

Are Bapcor 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.

Any way you look at it Bapcor shareholders can gain quiet confidence from the fact that insiders shelled out AU$366k to buy stock, over the last year. And when you consider that there was no insider selling, you can understand why shareholders might believe that lady luck will grace this business. We also note that it was the Independent Non-Executive Director, James Scott Todd, who made the biggest single acquisition, paying AU$78k for shares at about AU$7.82 each.

Along with the insider buying, another encouraging sign for Bapcor is that insiders, as a group, have a considerable shareholding. Indeed, they hold AU$24m worth of its stock. That's a lot of money, and no small incentive to work hard. Despite being just 0.9% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Bapcor Worth Keeping An Eye On?

One important encouraging feature of Bapcor is that it is growing profits. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. However, before you get too excited we've discovered 1 warning sign for Bapcor that you should be aware of.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Bapcor, 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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