Here's Why We Think Sagicor Financial (TSE:SFC) Is Well Worth Watching

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. 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. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

In contrast to all that, many investors prefer to focus on companies like Sagicor Financial (TSE:SFC), 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 Sagicor Financial

How Quickly Is Sagicor Financial Increasing Earnings Per Share?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS) outcomes. That means EPS growth is considered a real positive by most successful long-term investors. Shareholders will be happy to know that Sagicor Financial's EPS has grown 27% 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 beaming.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. Our analysis has highlighted that Sagicor Financial'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. The music to the ears of Sagicor Financial shareholders is that EBIT margins have grown from 11% to 15% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

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 Sagicor Financial's forecast profits?

Are Sagicor Financial 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. 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.

In the last twelve months Sagicor Financial insiders spent US$12k on stock; good news for shareholders. This might not be a huge sum, but it's well worth noting anyway, given the complete lack of selling.

The good news, alongside the insider buying, for Sagicor Financial bulls is that insiders (collectively) have a meaningful investment in the stock. To be specific, they have US$31m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 3.4% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Should You Add Sagicor Financial To Your Watchlist?

You can't deny that Sagicor Financial 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 that this stock may well deserve a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Sagicor Financial (at least 1 which is concerning) , and understanding them should be part of your investment process.

Keen growth investors love to see insider buying. Thankfully, Sagicor Financial 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.