Is Now The Time To Put Canaf Investments (CVE:CAF) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. 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. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Canaf Investments (CVE:CAF). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

See our latest analysis for Canaf Investments

How Fast Is Canaf Investments Growing?

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. To the delight of shareholders, Canaf Investments has achieved impressive annual EPS growth of 41%, compound, over the last three years. Growth that fast may well be fleeting, but it should be more than enough to pique the interest of the wary stock pickers.

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. Canaf Investments shareholders can take confidence from the fact that EBIT margins are up from 4.7% to 10%, and revenue is growing. That's great to see, on both counts.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

Since Canaf Investments is no giant, with a market capitalisation of CA$7.8m, you should definitely check its cash and debt before getting too excited about its prospects.

Are Canaf Investments Insiders Aligned With All Shareholders?

As a general rule, it's worth considering how much the CEO is paid, since unreasonably high rates could be considered against the interests of shareholders. The median total compensation for CEOs of companies similar in size to Canaf Investments, with market caps under US$200m is around US$182k.

Canaf Investments' CEO took home a total compensation package worth US$143k in the year leading up to October 2022. That seems pretty reasonable, especially given it's below the median for similar sized companies. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of a culture of integrity, in a broader sense.

Does Canaf Investments Deserve A Spot On Your Watchlist?

Canaf Investments' earnings per share have been soaring, with growth rates sky high. With increasing profits, its seems likely the business has a rosy future; and it may have hit an inflection point. What's more, the fact that the CEO's compensation is quite reasonable is a sign that the company is conscious of excessive spending. So Canaf Investments looks like it could be a good quality growth stock, at first glance. That's worth watching. It is worth noting though that we have found 1 warning sign for Canaf Investments that you need to take into consideration.

There's always the possibility of doing well buying stocks that are not growing earnings and do not have insiders buying shares. But for those who consider these important metrics, we encourage you to check out companies that do have those features. You can access 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. 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.