Here's Why We Think Canaccord Genuity Group (TSE:CF) Is Well Worth Watching

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.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Canaccord Genuity Group (TSE:CF). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

Check out our latest analysis for Canaccord Genuity Group

Canaccord Genuity Group's Improving Profits

In the last three years Canaccord Genuity Group's earnings per share took off like a rocket; fast, and from a low base. So the actual rate of growth doesn't tell us much. As a result, I'll zoom in on growth over the last year, instead. Like the last firework on New Year's Eve accelerating into the sky, Canaccord Genuity Group's EPS shot from CA$1.49 to CA$3.44, over the last year. Year on year growth of 131% is certainly a sight to behold. That could be a sign that the business has reached a true inflection point.

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. Canaccord Genuity Group maintained stable EBIT margins over the last year, all while growing revenue 40% to CA$2.2b. That's progress.

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

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 Canaccord Genuity Group EPS 100% free.

Are Canaccord Genuity 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. So it is good to see that Canaccord Genuity Group insiders have a significant amount of capital invested in the stock. Indeed, they have a glittering mountain of wealth invested in it, currently valued at CA$143m. That equates to 14% of the company, making insiders powerful and aligned with other shareholders. So it might be my imagination, but I do sense the glimmer of an opportunity.

Is Canaccord Genuity Group Worth Keeping An Eye On?

Canaccord Genuity Group's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So to my mind Canaccord Genuity Group is worth putting on your watchlist; after all, shareholders do well when the market underestimates fast growing companies. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Canaccord Genuity Group that you should be aware of.

Although Canaccord Genuity 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.

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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.