Here's Why We Think Cannara Biotech (CVE:LOVE) Might Deserve Your Attention Today

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.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Cannara Biotech (CVE:LOVE). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

View our latest analysis for Cannara Biotech

How Fast Is Cannara Biotech Growing Its Earnings Per Share?

In business, profits are a key measure of success; and share prices tend to reflect earnings per share (EPS) performance. So for many budding investors, improving EPS is considered a good sign. It is awe-striking that Cannara Biotech's EPS went from CA$0.032 to CA$0.10 in just one year. Even though that growth rate may not be repeated, that looks like a breakout improvement. This could point to the business hitting a point of inflection.

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. The good news is that Cannara Biotech is growing revenues, and EBIT margins improved by 6.0 percentage points to 21%, over the last year. Ticking those two boxes is a good sign of growth, in our book.

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

Cannara Biotech isn't a huge company, given its market capitalisation of CA$82m. That makes it extra important to check on its balance sheet strength.

Are Cannara Biotech 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. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Not only did Cannara Biotech insiders refrain from selling stock during the year, but they also spent CA$68k buying it. That's nice to see, because it suggests insiders are optimistic. Zooming in, we can see that the biggest insider purchase was by Independent Director Derek Stern for CA$60k worth of shares, at about CA$1.13 per share.

Does Cannara Biotech Deserve A Spot On Your Watchlist?

Cannara Biotech's earnings per share have been soaring, with growth rates sky high. Growth investors should find it difficult to look past that strong EPS move. And may very well signal a significant inflection point for the business. If that's the case, you may regret neglecting to put Cannara Biotech on your watchlist. However, before you get too excited we've discovered 2 warning signs for Cannara Biotech (1 doesn't sit too well with us!) that you should be aware of.

The good news is that Cannara Biotech is not the only growth stock with insider buying. Here's a list of growth-focused companies in CA 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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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.