Stock Analysis

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

TSX:SU
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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. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Suncor Energy (TSE:SU), which has not only revenues, but also profits. While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

See our latest analysis for Suncor Energy

Suncor Energy's Improving Profits

Suncor Energy 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. Suncor Energy's EPS skyrocketed from CA$4.26 to CA$6.25, in just one year; a result that's bound to bring a smile to shareholders. That's a impressive gain of 47%.

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. The music to the ears of Suncor Energy shareholders is that EBIT margins have grown from 20% to 27% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

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:SU Earnings and Revenue History May 17th 2023

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

Are Suncor Energy 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. 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.

It's good to see Suncor Energy insiders walking the walk, by spending CA$919k on shares in just twelve months. This, combined with the lack of sales from insiders, should be a great signal for shareholders in what's to come. It is also worth noting that it was Executive VP of Corporate Development & CFO Kristopher Smith who made the biggest single purchase, worth CA$704k, paying CA$39.11 per share.

On top of the insider buying, it's good to see that Suncor Energy insiders have a valuable investment in the business. As a matter of fact, their holding is valued at CA$17m. This considerable investment should help drive long-term value in the business. Despite being just 0.03% of the company, the value of that investment is enough to show insiders have plenty riding on the venture.

Is Suncor Energy Worth Keeping An Eye On?

For growth investors, Suncor Energy's raw rate of earnings growth is a beacon in the night. Not only that, but we can see that insiders both own a lot of, and are buying more shares in the company. These things considered, this is one stock worth watching. Still, you should learn about the 2 warning signs we've spotted with Suncor Energy (including 1 which is a bit unpleasant).

Keen growth investors love to see insider buying. Thankfully, Suncor Energy isn't the only one. You can see a a free list of them here.

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 Suncor Energy 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.

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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.