Does Interfor (TSE:IFP) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
April 12, 2022
TSX:IFP
Source: Shutterstock

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 completely lacks a track record of revenue and profit. 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.

So if you're like me, you might be more interested in profitable, growing companies, like Interfor (TSE:IFP). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. 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 Interfor

Interfor's Improving Profits

In business, though not in life, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS). So like a ray of sunshine through a gap in the clouds, improving EPS is considered a good sign. It is therefore awe-striking that Interfor's EPS went from CA$4.18 to CA$13.81 in just one year. When you see earnings grow that quickly, it often means good things ahead for the company. Could this be a sign that the business has reached an inflection point?

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. Interfor shareholders can take confidence from the fact that EBIT margins are up from 20% to 34%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
TSX:IFP Earnings and Revenue History April 12th 2022

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Interfor's future profits.

Are Interfor Insiders Aligned With All Shareholders?

Like that fresh smell in the air when the rains are coming, insider buying fills me with optimistic anticipation. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

While Interfor insiders did net -CA$111k selling stock over the last year, they invested CA$421k, a much higher figure. On balance, to me, this signals their optimism. We also note that it was the Senior VP & CFO, Richard Pozzebon, who made the biggest single acquisition, paying CA$236k for shares at about CA$26.50 each.

Is Interfor Worth Keeping An Eye On?

Interfor's earnings per share have taken off like a rocket aimed right at the moon. Growth investors should find it difficult to look past that strong EPS move. And indeed, it could be a sign that the business is at an inflection point. For me, this situation certainly piques my interest. It is worth noting though that we have found 2 warning signs for Interfor (1 shouldn't be ignored!) that you need to take into consideration.

The good news is that Interfor 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.

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