If You Like EPS Growth Then Check Out Power Corporation of Canada (TSE:POW) Before It's Too Late

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 as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.'

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Power Corporation of Canada (TSE:POW). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. 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.

View our latest analysis for Power Corporation of Canada

Power Corporation of Canada'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. Power Corporation of Canada managed to grow EPS by 5.9% per year, over three years. While that sort of growth rate isn't amazing, it does show the business is growing.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of Power Corporation of Canada'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 Power Corporation of Canada's EBIT margins were flat over the last year, revenue grew by a solid 8.4% to CA$64b. That's a real positive.

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.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Power Corporation of Canada's forecast profits?

Are Power Corporation of Canada 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, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

We do note that, in the last year, insiders sold -CA$188k worth of shares. But that's far less than the CA$1.5m insiders spend purchasing stock. I find this encouraging because it suggests they are optimistic about the Power Corporation of Canada's future. We also note that it was the Independent Director, Pierre Beaudoin, who made the biggest single acquisition, paying CA$1.5m for shares at about CA$42.14 each.

On top of the insider buying, it's good to see that Power Corporation of Canada insiders have a valuable investment in the business. Notably, they have an enormous stake in the company, worth CA$138m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Should You Add Power Corporation of Canada To Your Watchlist?

As I already mentioned, Power Corporation of Canada is a growing business, which is what I like to see. Better yet, insiders are significant shareholders, and have been buying more shares. To me, that all makes it well worth a spot on your watchlist, as well as continuing research. You still need to take note of risks, for example - Power Corporation of Canada has 2 warning signs (and 1 which can't be ignored) we think you should know about.

The good news is that Power Corporation of Canada 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.

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.

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