Is Now The Time To Put Element Fleet Management (TSE:EFN) On Your Watchlist?

By
Simply Wall St
Published
April 19, 2022
TSX:EFN
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Element Fleet Management (TSE:EFN). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

See our latest analysis for Element Fleet Management

Element Fleet Management's Improving Profits

In the last three years Element Fleet Management'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. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, Element Fleet Management's EPS soared from CA$0.56 to CA$0.81, in just one year. That's a commendable gain of 44%.

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 Element Fleet Management'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 Element Fleet Management's EBIT margins were flat over the last year, revenue grew by a solid 2.7% to CA$1.5b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
TSX:EFN Earnings and Revenue History April 19th 2022

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?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. 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.

The good news for Element Fleet Management shareholders is that no insiders reported selling shares in the last year. So it's definitely nice that Executive VP & CFO Frank Ruperto bought CA$61k worth of shares at an average price of around CA$12.12.

Should You Add Element Fleet Management To Your Watchlist?

You can't deny that Element Fleet Management has grown its earnings per share at a very impressive rate. That's attractive. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. To put it succinctly; Element Fleet Management is a strong candidate for your watchlist. It is worth noting though that we have found 2 warning signs for Element Fleet Management that you need to take into consideration.

There are plenty of other companies that have insiders buying up shares. So if you like the sound of Element Fleet Management, you'll probably love this free list of growing companies that insiders are buying.

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

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