Does Centrale d'Achat Française pour l'Outre-Mer Société Anonyme (EPA:CAFO) Deserve A Spot On Your Watchlist?

By
Simply Wall St
Published
February 02, 2022
ENXTPA:CAFO
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.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Centrale d'Achat Française pour l'Outre-Mer Société Anonyme (EPA:CAFO). While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Centrale d'Achat Française pour l'Outre-Mer Société Anonyme

How Fast Is Centrale d'Achat Française pour l'Outre-Mer Société Anonyme Growing?

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its 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 Centrale d'Achat Française pour l'Outre-Mer Société Anonyme has grown EPS by 52% per year, 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.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Centrale d'Achat Française pour l'Outre-Mer Société Anonyme shareholders can take confidence from the fact that EBIT margins are up from 2.4% to 10%, and revenue is growing. Ticking those two boxes is a good sign of growth, in my book.

In the chart below, you can see how the company has grown earnings, and revenue, over time. Click on the chart to see the exact numbers.

earnings-and-revenue-history
ENXTPA:CAFO Earnings and Revenue History February 2nd 2022

Since Centrale d'Achat Française pour l'Outre-Mer Société Anonyme is no giant, with a market capitalization of €136m, so you should definitely check its cash and debt before getting too excited about its prospects.

Are Centrale d'Achat Française pour l'Outre-Mer Société Anonyme 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 as you can imagine, the fact that Centrale d'Achat Française pour l'Outre-Mer Société Anonyme insiders own a significant number of shares certainly appeals to me. Indeed, with a collective holding of 63%, 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. With that sort of holding, insiders have about €85m riding on the stock, at current prices. That should be more than enough to keep them focussed on creating shareholder value!

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, I'd say they are indeed. For companies with market capitalizations between €89m and €356m, like Centrale d'Achat Française pour l'Outre-Mer Société Anonyme, the median CEO pay is around €355k.

The Centrale d'Achat Française pour l'Outre-Mer Société Anonyme CEO received total compensation of only €25k in the year to . You could consider this pay as somewhat symbolic, which suggests the CEO does not need a lot of compensation to stay motivated. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is Centrale d'Achat Française pour l'Outre-Mer Société Anonyme Worth Keeping An Eye On?

Centrale d'Achat Française pour l'Outre-Mer Société Anonyme's earnings per share have taken off like a rocket aimed right at the moon. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Big growth can make big winners, so I do think Centrale d'Achat Française pour l'Outre-Mer Société Anonyme is worth considering carefully. Before you take the next step you should know about the 1 warning sign for Centrale d'Achat Française pour l'Outre-Mer Société Anonyme that we have uncovered.

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.

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