We Ran A Stock Scan For Earnings Growth And Birchcliff Energy (TSE:BIR) Passed With Ease

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. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

In contrast to all that, many investors prefer to focus on companies like Birchcliff Energy (TSE:BIR), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Birchcliff Energy

How Fast Is Birchcliff Energy Growing Its Earnings Per Share?

In the last three years Birchcliff Energy's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Birchcliff Energy's EPS shot from CA$0.92 to CA$2.60, over the last year. It's a rarity to see 182% year-on-year growth like that. The best case scenario? That the business has hit 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. Our analysis has highlighted that Birchcliff Energy'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. Birchcliff Energy shareholders can take confidence from the fact that EBIT margins are up from 43% to 67%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Birchcliff Energy.

Are Birchcliff Energy Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The real kicker here is that Birchcliff Energy insiders spent a staggering CA$1.2m on acquiring shares in just one year, without single share being sold in the meantime. Knowing this, Birchcliff Energy will have have all eyes on them in anticipation for the what could happen in the near future. Zooming in, we can see that the biggest insider purchase was by Executive Vice President of Operations David Humphreys for CA$634k worth of shares, at about CA$10.79 per share.

The good news, alongside the insider buying, for Birchcliff Energy bulls is that insiders (collectively) have a meaningful investment in the stock. As a matter of fact, their holding is valued at CA$46m. That shows significant buy-in, and may indicate conviction in the business strategy. While their ownership only accounts for 2.1%, this is still a considerable amount at stake to encourage the business to maintain a strategy that will deliver value to shareholders.

While insiders are apparently happy to hold and accumulate shares, that is just part of the big picture. That's because Birchcliff Energy's CEO, Jeff Tonken, is paid at a relatively modest level when compared to other CEOs for companies of this size. For companies with market capitalisations between CA$1.3b and CA$4.3b, like Birchcliff Energy, the median CEO pay is around CA$3.0m.

Birchcliff Energy offered total compensation worth CA$1.9m to its CEO in the year to December 2021. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of a culture of integrity, in a broader sense.

Does Birchcliff Energy Deserve A Spot On Your Watchlist?

Birchcliff Energy's earnings per share growth have been climbing higher at an appreciable rate. To make matters even better, the company insiders who know the company best have put their faith in the its future and have been buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Birchcliff Energy belongs near the top of your watchlist. Another important measure of business quality not discussed here, is return on equity (ROE). Click on this link to see how Birchcliff Energy shapes up to industry peers, when it comes to ROE.

The good news is that Birchcliff Energy 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.

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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.