Stock Analysis

Should You Be Adding Equitable Group (TSE:EQB) To Your Watchlist Today?

TSX:EQB
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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 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.

In contrast to all that, I prefer to spend time on companies like Equitable Group (TSE:EQB), which has not only revenues, but also profits. 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.

See our latest analysis for Equitable Group

Equitable Group's Earnings Per Share Are Growing.

As one of my mentors once told me, share price follows earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Equitable Group has managed to grow EPS by 19% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

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. I note that Equitable Group's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Equitable Group maintained stable EBIT margins over the last year, all while growing revenue 26% to CA$629m. That's a real positive.

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.

earnings-and-revenue-history
TSX:EQB Earnings and Revenue History December 6th 2021

Fortunately, we've got access to analyst forecasts of Equitable Group's future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Equitable Group Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Equitable Group shares worth a considerable sum. Notably, they have an enormous stake in the company, worth CA$512m. That equates to 21% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.

Should You Add Equitable Group To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Equitable Group's strong EPS growth. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Equitable Group (1 is a bit concerning) you should be aware of.

Although Equitable Group 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 EQB 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.