With EPS Growth And More, Premier Foods (LON:PFD) Makes An Interesting Case

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Premier Foods (LON:PFD). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Premier Foods with the means to add long-term value to shareholders.

See our latest analysis for Premier Foods

Premier Foods' Earnings Per Share Are 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) outcomes. That makes EPS growth an attractive quality for any company. Impressively, Premier Foods has grown EPS by 24% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

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. EBIT margins for Premier Foods remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 12% to UK£1.0b. That's a real positive.

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.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Premier Foods' future EPS 100% free.

Are Premier Foods Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

Premier Foods insiders both bought and sold shares over the last twelve months, but they did end up spending UK£6.5k more on stock than they received from selling it. At face value we can consider this a fairly encouraging sign for the company.

Does Premier Foods Deserve A Spot On Your Watchlist?

You can't deny that Premier Foods has grown its earnings per share at a very impressive rate. That's attractive. Growth in EPS isn't the only striking feature with company insiders adding to their holdings being another noteworthy vote of confidence for the company. In essence, your time will not be wasted checking out Premier Foods in more detail. While we've looked at the quality of the earnings, we haven't yet done any work to value the stock. So if you like to buy cheap, you may want to check if Premier Foods is trading on a high P/E or a low P/E, relative to its industry.

The good news is that Premier Foods is not the only growth stock with insider buying. Here's a list of them... 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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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.