Stock Analysis

Do Goodfellow's (TSE:GDL) Earnings Warrant Your Attention?

TSX:GDL
Source: Shutterstock

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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Goodfellow (TSE:GDL). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Goodfellow

How Fast Is Goodfellow Growing Its Earnings Per Share?

Goodfellow has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. So it would be better to isolate the growth rate over the last year for our analysis. Goodfellow's EPS has risen over the last 12 months, growing from CA$3.92 to CA$4.47. There's little doubt shareholders would be happy with that 14% gain.

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. EBIT margins for Goodfellow remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 4.9% to CA$625m. That's progress.

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:GDL Earnings and Revenue History January 12th 2023

Since Goodfellow is no giant, with a market capitalisation of CA$123m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Goodfellow 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. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Goodfellow top brass are certainly in sync, not having sold any shares, over the last year. But more importantly, President & CEO Patrick Goodfellow spent CA$158k acquiring shares, doing so at an average price of CA$10.52. Strong buying like that could be a sign of opportunity.

Along with the insider buying, another encouraging sign for Goodfellow is that insiders, as a group, have a considerable shareholding. As a matter of fact, their holding is valued at CA$17m. That shows significant buy-in, and may indicate conviction in the business strategy. Those holdings account for over 14% of the company; visible skin in the game.

Should You Add Goodfellow To Your Watchlist?

One positive for Goodfellow 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. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. Still, you should learn about the 2 warning signs we've spotted with Goodfellow.

The good news is that Goodfellow is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

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 Goodfellow 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.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.