Stock Analysis

Here's Why I Think Canadian Imperial Bank of Commerce (TSE:CM) Might Deserve Your Attention Today

TSX:CM
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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. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

So if you're like me, you might be more interested in profitable, growing companies, like Canadian Imperial Bank of Commerce (TSE:CM). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce's Earnings Per Share Are Growing.

If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Over the last three years, Canadian Imperial Bank of Commerce has grown EPS by 8.3% per year. That growth rate is fairly good, assuming the company can keep it up.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Canadian Imperial Bank of Commerce's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. While we note Canadian Imperial Bank of Commerce's EBIT margins were flat over the last year, revenue grew by a solid 24% to CA$20b. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. For finer detail, click on the image.

earnings-and-revenue-history
TSX:CM Earnings and Revenue History May 20th 2022

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 Canadian Imperial Bank of Commerce's future profits.

Are Canadian Imperial Bank of Commerce Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a CA$62b company like Canadian Imperial Bank of Commerce. But we do take comfort from the fact that they are investors in the company. To be specific, they have CA$28m worth of shares. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 0.04% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is Canadian Imperial Bank of Commerce Worth Keeping An Eye On?

One important encouraging feature of Canadian Imperial Bank of Commerce is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. Now, you could try to make up your mind on Canadian Imperial Bank of Commerce by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Canadian Imperial Bank of Commerce certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Canadian Imperial Bank of Commerce is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.