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. 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.
If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Manulife Financial (TSE:MFC). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. In comparison, loss making companies act like a sponge for capital – but unlike such a sponge they do not always produce something when squeezed.
Manulife Financial’s Earnings Per Share Are Growing.
If a company can keep growing earnings per share (EPS) long enough, its share price will eventually follow. It’s no surprise, then, that I like to invest in companies with EPS growth. As a tree reaches steadily for the sky, Manulife Financial’s EPS has grown 30% each year, compound, over three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.
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. I note that Manulife Financial’s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Manulife Financial’s EBIT margins have actually improved by 11.7 percentage points in the last year, to reach 18%, but, on the flip side, revenue was down 34%. That’s not ideal.
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.
In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Manulife Financial’s forecast profits?.
Are Manulife Financial Insiders Aligned With All Shareholders?
Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. 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.
It’s a pleasure to note that insiders spent CA$1.5m buying Manulife Financial shares, over the last year, without reporting any share sales whatsoever. And so I find myself almost expectant, and certainly hopeful, that this large outlay signals prescient optimism for the business. It is also worth noting that it was Director Claude Prieur who made the biggest single purchase, worth CA$942k, paying CA$20.93 per share.
Does Manulife Financial Deserve A Spot On Your Watchlist?
For growth investors like me, Manulife Financial’s raw rate of earnings growth is a beacon in the night. The growth rate whets my appetite for research, and the insider buying only increases my interest in the stock. So on this analysis I believe Manulife Financial is probably worth spending some time on. While we’ve looked at the quality of the earnings, we haven’t yet done any work to value the stock. So if you like to buy cheap, you may want to check if Manulife Financial is trading on a high P/E or a low P/E, relative to its industry.
The good news is that Manulife Financial is not the only growth stock with insider buying. Here’s a 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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.