Should You Be Adding Cargojet (TSE:CJT) To Your Watchlist Today?

By
Simply Wall St
Published
May 14, 2022
TSX:CJT
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. 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 Cargojet (TSE:CJT). Now, I'm not saying that the stock is necessarily undervalued today; but I can't shake an appreciation for the profitability of the business itself. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Cargojet

Cargojet's Improving Profits

Even with very modest growth rates, a company will usually do well if it improves earnings per share (EPS) year after year. So it's no surprise that some investors are more inclined to invest in profitable businesses. It is therefore awe-striking that Cargojet's EPS went from CA$0.21 to CA$1.25 in just one year. Even though that growth rate is unlikely to be repeated, that looks like a breakout improvement. Could this be a sign that the business has reached an inflection point?

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. Cargojet maintained stable EBIT margins over the last year, all while growing revenue 18% to CA$831m. That's progress.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
TSX:CJT Earnings and Revenue History May 14th 2022

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Cargojet's forecast profits?

Are Cargojet Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Cargojet shares worth a considerable sum. Given insiders own a small fortune of shares, currently valued at CA$70m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.

Should You Add Cargojet To Your Watchlist?

Cargojet's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That EPS growth certainly has my attention, and the large insider ownership only serves to further stoke my interest. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Cargojet for a spot on your watchlist. What about risks? Every company has them, and we've spotted 2 warning signs for Cargojet you should know about.

Although Cargojet certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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