Do Berliner Effektengesellschaft's (FRA:BFV) Earnings Warrant Your Attention?

Published
April 24, 2022
DB:BFV
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. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Berliner Effektengesellschaft (FRA:BFV). 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.

View our latest analysis for Berliner Effektengesellschaft

How Quickly Is Berliner Effektengesellschaft Increasing Earnings Per Share?

As one of my mentors once told me, share price follows earnings per share (EPS). Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Berliner Effektengesellschaft has grown EPS by 41% per year, over the last three years. Growth that fast may well be fleeting, but like a lotus blooming from a murky pond, it sparks joy for 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. Berliner Effektengesellschaft maintained stable EBIT margins over the last year, all while growing revenue 46% to €274m. That's a real positive.

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.

earnings-and-revenue-history
DB:BFV Earnings and Revenue History April 24th 2022

While it's always good to see growing profits, you should always remember that a weak balance sheet could come back to bite. So check Berliner Effektengesellschaft's balance sheet strength, before getting too excited.

Are Berliner Effektengesellschaft 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 Berliner Effektengesellschaft insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 56%, company insiders are in control and have plenty of capital behind the venture. This makes me think they will be incentivised to plan for the long term - something I like to see. At the current share price, that insider holding is worth a whopping €617m. That means they have plenty of their own capital riding on the performance of the business!

Is Berliner Effektengesellschaft Worth Keeping An Eye On?

Berliner Effektengesellschaft'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 Berliner Effektengesellschaft for a spot on your watchlist. Now, you could try to make up your mind on Berliner Effektengesellschaft by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Berliner Effektengesellschaft 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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About DB:BFV

Berliner Effektengesellschaft

Berliner Effektengesellschaft AG, through its subsidiaries, provides various banking and financial products and services in Germany.

Proven track record with mediocre balance sheet.