I Ran A Stock Scan For Earnings Growth And Prodigy Ventures (CVE:PGV) Passed With Ease

By
Simply Wall St
Published
June 11, 2021
TSXV:PGV
Source: Shutterstock

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story stocks' without revenue, let alone profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Prodigy Ventures (CVE:PGV). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. While a well funded company may sustain losses for years, unless its owners have an endless appetite for subsidizing the customer, it will need to generate a profit eventually, or else breathe its last breath.

View our latest analysis for Prodigy Ventures

How Fast Is Prodigy Ventures Growing?

As one of my mentors once told me, share price follows earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud Prodigy Ventures's stratospheric annual EPS growth of 38%, compound, over the last three years? While that sort of growth rate isn't sustainable for long, it certainly catches my attention; like a crow with a sparkly stone.

I like to take a look at earnings before interest and (EBIT) tax margins, as well as revenue growth, to get another take on the quality of the company's growth. Unfortunately, Prodigy Ventures's revenue dropped 26% last year, but the silver lining is that EBIT margins improved from 1.7% to 5.2%. That's not ideal.

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.

earnings-and-revenue-history
TSXV:PGV Earnings and Revenue History June 11th 2021

Since Prodigy Ventures is no giant, with a market capitalization of CA$18m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Prodigy Ventures Insiders Aligned With All Shareholders?

Many consider high insider ownership to be a strong sign of alignment between the leaders of a company and the ordinary shareholders. So as you can imagine, the fact that Prodigy Ventures insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 71%, company insiders are in control and have plenty of capital behind the venture. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. Valued at only CA$18m Prodigy Ventures is really small for a listed company. So despite a large proportional holding, insiders only have CA$13m worth of stock. That might not be a huge sum but it should be enough to keep insiders motivated!

Should You Add Prodigy Ventures To Your Watchlist?

Prodigy Ventures's earnings per share have taken off like a rocket aimed right at the moon. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. At times fast EPS growth is a sign the business has reached an inflection point; and I do like those. So yes, on this short analysis I do think it's worth considering Prodigy Ventures for a spot on your watchlist. Still, you should learn about the 3 warning signs we've spotted with Prodigy Ventures (including 1 which shouldn't be ignored) .

You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies 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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