Should You Be Adding Power Corporation of Canada (TSE:POW) To Your Watchlist Today?

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. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

In contrast to all that, I prefer to spend time on companies like Power Corporation of Canada (TSE:POW), which has not only revenues, but also profits. Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for Power Corporation of Canada

Power Corporation of Canada's Improving Profits

Even modest earnings per share growth (EPS) can create meaningful value, when it is sustained reliably from year to year. So EPS growth can certainly encourage an investor to take note of a stock. Like a falcon taking flight, Power Corporation of Canada's EPS soared from CA$2.20 to CA$3.47, over the last year. That's a impressive gain of 58%.

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). I note that Power Corporation of Canada's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Power Corporation of Canada maintained stable EBIT margins over the last year, all while growing revenue 57% to CA$67b. That's a real positive.

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

While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Power Corporation of Canada?

Are Power Corporation of Canada 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.

Despite -CA$20k worth of sales, Power Corporation of Canada insiders have overwhelmingly been buying the stock, spending CA$499k on purchases in the last twelve months. On balance, to me, this signals their optimism. It is also worth noting that it was Independent Director Pierre Beaudoin who made the biggest single purchase, worth CA$498k, paying CA$26.77 per share.

Along with the insider buying, another encouraging sign for Power Corporation of Canada is that insiders, as a group, have a considerable shareholding. Indeed, they have a glittering mountain of wealth invested in it, currently valued at CA$128m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!

Is Power Corporation of Canada Worth Keeping An Eye On?

You can't deny that Power Corporation of Canada has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. So it's fair to say I think this stock may well deserve a spot on your watchlist. It is worth noting though that we have found 2 warning signs for Power Corporation of Canada (1 is a bit unpleasant!) that you need to take into consideration.

As a growth investor I do like to see insider buying. But Power Corporation of Canada 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.

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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. 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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