Here's Why We Think Element Fleet Management (TSE:EFN) Might Deserve Your Attention Today

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Element Fleet Management (TSE:EFN). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Element Fleet Management

How Quickly Is Element Fleet Management Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. So it makes sense that experienced investors pay close attention to company EPS when undertaking investment research. Impressively, Element Fleet Management has grown EPS by 22% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. Our analysis has highlighted that Element Fleet Management's revenue from operations did not account for all of their revenue in the previous 12 months, so our analysis of its margins might not accurately reflect the underlying business. Element Fleet Management maintained stable EBIT margins over the last year, all while growing revenue 19% to US$1.5b. That's encouraging news for the company!

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

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

Are Element Fleet Management Insiders Aligned With All Shareholders?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Although we did see some insider selling (worth US$1.3m) this was overshadowed by a mountain of buying, totalling US$3.2m in just one year. This adds to the interest in Element Fleet Management because it suggests that those who understand the company best, are optimistic. We also note that it was the CEO, President & Director, Laura Dottori-Attanasio, who made the biggest single acquisition, paying CA$744k for shares at about CA$20.07 each.

Does Element Fleet Management Deserve A Spot On Your Watchlist?

You can't deny that Element Fleet Management has grown its earnings per share at a very impressive rate. That's attractive. Not only is that growth rate rather juicy, but the insider buying adds fuel to the fire. In essence, your time will not be wasted checking out Element Fleet Management in more detail. Still, you should learn about the 3 warning signs we've spotted with Element Fleet Management (including 1 which is a bit concerning).

Keen growth investors love to see insider activity. Thankfully, Element Fleet Management isn't the only one. You can see a a curated list of Canadian companies which have exhibited consistent growth accompanied by high insider ownership.

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.

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