Is Now The Time To Put DF Deutsche Forfait (ETR:DFTK) On Your Watchlist?

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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like DF Deutsche Forfait (ETR:DFTK). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for DF Deutsche Forfait

How Fast Is DF Deutsche Forfait Growing Its Earnings Per Share?

Over the last three years, DF Deutsche Forfait has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a falcon taking flight, DF Deutsche Forfait's EPS soared from €0.38 to €0.61, over the last year. That's a commendable gain of 58%.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). Not all of DF Deutsche Forfait's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. To cut to the chase DF Deutsche Forfait's EBIT margins dropped last year, and so did its revenue. That is, not a hint of euphemism here, suboptimal.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

Since DF Deutsche Forfait is no giant, with a market capitalization of €18m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are DF Deutsche Forfait Insiders Aligned With All Shareholders?

Personally, I like to see high insider ownership of a company, since it suggests that it will be managed in the interests of shareholders. So we're pleased to report that DF Deutsche Forfait insiders own a meaningful share of the business. In fact, they own 79% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. To me this is a good sign because it suggests they will be incentivised to build value for shareholders over the long term. With that sort of holding, insiders have about €15m riding on the stock, at current prices. That's nothing to sneeze at!

Does DF Deutsche Forfait Deserve A Spot On Your Watchlist?

You can't deny that DF Deutsche Forfait has grown its earnings per share at a very impressive rate. That's attractive. I think that EPS growth is something to boast of, and it doesn't surprise me that insiders are holding on to a considerable chunk of shares. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. We don't want to rain on the parade too much, but we did also find 4 warning signs for DF Deutsche Forfait (3 can't be ignored!) that you need to be mindful of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.